Edgar Filing: COLOR IMAGING INC

Rule 424(b)(3)
Registration Statement No. 333-76090

UP TO

7,000,000 SHARES

OFFERED BY

COLOR IMAGING, INC.

AND

3,959,487 SHARES OFFERED BY SELLING STOCKHOLDERS

We are offering up to a maximum of 7,000,000 shares of our common stock for sale
at $1.35 per share, the average of the closing prices of our common stock for
the 15 trading days prior to the effective date of this offering. Our officers
and directors will use their best efforts to offer and sell our shares of common
stock directly to investors without the assistance of an underwriter. We will
require investors to purchase at least 100,000 shares. Funds raised from the
sale of our common stock will not go into escrow, trust or any other similar
arrangement. Our offering will terminate on February 14, 2003, unless the entire
offering has been sold prior to that time or otherwise terminated.

Our selling stockholders are offering to sell up to 3,959,487 shares of common
stock, including shares underlying warrants to purchase our common stock. The
selling stockholders may sell our common stock on the open market at market
prices in ordinary broker transactions or in negotiated transactions, and they
may pay broker commissions in connection with such transactions. We will not
receive any of the proceeds from the sale of our common stock by selling
stockholders. In the event a selling stockholder exercises warrants to purchase
our common stock, we will receive proceeds from the exercise of the warrant;
provided that, the selling stockholder exercises the warrant by other than a
cashless exercise. We will not pay any broker commissions in connection with
sales of our common stock by selling stockholders. The concurrent offering of
3,959,487 shares of our common stock by the selling stockholders is separate
from our offering of up to 7,000,000 shares.

Our common stock is quoted on the OTC Bulletin Board under the symbol CIMG. On
January 22, 2003, the closing price of our stock was $1.30 per share.

You should carefully consider each of the risk factors described under "Risk
Factors" beginning on page 3 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is January 23, 2003

TABLE OF CONTENTS

Prospectus Summary.............................................................1
Risk Factors...................................................................3
Use Of Proceeds................................................................9
Capitalization.................................................................9
Color Imaging, Inc............................................................10
Market For Common Stock And Related Stockholder Matters.......................18
Management's Discussion And Analysis..........................................19
Directors, Executive Officers, Promoters And Control Persons..................30
Security Ownership Of Certain Beneficial Owners And Management................33
Certain Relationships And Related Transactions................................34
Description Of Securities.....................................................35
Selling Stockholders..........................................................37
Plan Of Distribution..........................................................41
Legal Matters.................................................................43
Independent Auditors..........................................................43
Indemnification...............................................................43
Further Information...........................................................43
Index To Consolidated Condensed Financial Statements.........................F-1
Exhibit A-Subscription Agreement.............................................A-1

PROSPECTUS SUMMARY

You should read this summary together with the other information contained in
other parts of this prospectus. Because it is a summary, it does not contain all
of the information that you should consider before investing in our common
stock.

OVERVIEW

We develop, manufacture and market products used in electronic printing,
facsimile machines and analog and digital copiers. We formulate, develop,
manufacture, purchase from others and market electronic printing products,
including black text, color, magnetic character recognition and specialty
toners, and provides other parts and accessories for laser printers and digital
copiers.

COLOR IMAGING, INC.

Since 1989, Color Imaging, Inc. has developed, manufactured and marketed
products used in electronic printing. Color Imaging, Inc. formulates and
manufactures black text and specialty toners, including color and magnetic
character recognition toners for numerous laser printers, facsimile machines and
analog and digital photocopiers. Color Imaging, Inc.'s toners permit the
printing of a wide range of user-selected colors and also the full process color
printing of cyan, yellow, magenta and black. Magnetic character recognition
toners enable the printing of magnetic characters which are required for the
high-speed processing of checks and other financial documents. Color Imaging,
Inc. also supplies other consumable products used in electronic printing, and
photocopying, including toner cartridges, cartridge components, photoreceptors
and imaging drums.

Color Imaging, Inc. has continually expanded its product line and manufacturing
capabilities. This expansion has led to the creation of more than 130 different
black text, color, magnetic character recognition and specialty toner
formulations, including aftermarket toners and imaging products for printers and
facsimile machines manufactured by Brother(TM), Canon(TM), Delphax(TM), Hewlett
Packard(TM), IBM(TM), Lexmark(TM), Sharp(TM), Xerox(TM), Minolta(TM), Mita(TM),
Panafax(TM), Pentax(TM), Pitney Bowes(TM), Epson(TM), Fuji-Xerox(TM),
Toshiba(TM), Kyocera(TM), Okidata(TM), Panasonic(TM), and printing systems
developed by Logical Imaging Solutions, Inc. Color Imaging, Inc. also
manufacturers and or markets toners for use in Ricoh(TM), Sharp(TM), Xerox(TM),
Canon(TM), Lanier(TM) and Toshiba(TM) copiers. Color Imaging, Inc. also offers
product enhancements, including imaging supplies that enable standard laser
printers to print magnetic character recognition data. Color Imaging, Inc.
markets branded products directly to OEMs and its aftermarket products worldwide
to distributors and remanufacturers of laser printer toner cartridges and to
dealers and distributors of copier products.

On September 30, 2002, Color Imaging, Inc. disposed of its wholly-owned
subsidiary, Logical Imaging Solutions, Inc., in a common stock share exchange
with Digital Color Print, Inc., which is owned by four former directors. Since
its founding in 1993, Logical Imaging Solutions, Inc.'s development efforts have
focused on creating a high-speed digital variable data printing system for
commercial printing applications that combines software, hardware and consumable
products not only for black text for image printing but also in color. See
"Color Imaging, Inc. - Recent Developments" beginning on page 11.

THE OFFERING

COLOR IMAGING

This prospectus relates to an offering by us of up to 7,000,000 shares of common
stock for sale at $1.35 per share, the average of the closing prices of our
common stock for the 15 trading days prior to the effective date of this
offering. We will require investors to purchase at least 100,000 shares. We will
sell our common stock on a best-efforts basis and our offering will terminate on
February 14, 2003, unless the entire offering has been sold prior to that time
or otherwise terminated. There will be no escrow account. We will immediately
use all of the proceeds received from the sale of the shares.

SELLING STOCKHOLDERS

This prospectus also relates to the resale of up to 3,959,487 shares of our
common stock, including shares underlying warrants to purchase our common stock,
by several of our stockholders. The selling stockholders are not required to
sell our common stock and sales of our common stock are entirely at the
discretion of the selling stockholders. The selling stockholders may sell such
stock either on the open market at market prices in ordinary broker transactions
or in negotiated transactions, and they may pay broker commissions in connection
with such transactions. The selling stockholders may offer their shares at a
price that is lower than the price we offer our shares. We will not receive any
of the proceeds of sale of our common stock by the selling stockholders. In the
event a selling stockholder exercises warrants to purchase our common stock, we
will receive proceeds from the exercise of the warrant; provided that, the
selling stockholder exercises the warrant by other than a cashless exercise. We
will not receive any proceeds from the sale of our stock by selling stockholders
who sell our common stock received upon the exercise of warrants. In addition,
the exercise of the selling stockholders' warrants are not registered in this
offering, and the amounts we receive upon exercise of such warrants are not
proceeds of this offering. We will not pay any broker commissions in connection
with sale of our common stock by selling stockholders.

Our common stock is quoted on the OTC Bulletin Board under the symbol CIMG. On
January 22, 2003, the closing price for our common stock was $1.30 per share. We
will pay the costs of registering the offer and sale of the securities offered
hereby with the Securities and Exchange Commission and any required state
securities agencies.

Shares Offered by Color Imaging, Inc...............................7,000,000

Offering Price Per Share...........................................$1.35.per.share, the average of the closing
prices of our common stock for the 15 trading
days prior to the effective date of this offering.

Common Stock Offered by Selling Stockholders (1)...................3,959,487

OTC Bulletin Board Symbol..........................................CIMG

Common Stock Outstanding Before the Offering (2)...................8,437,965

Common Stock to be Outstanding After the Offering (2)..............15,437,965

Proceeds from Shares Offered by Color Imaging .....................$9,450,000

------------------------------------
(1) Includes shares of common stock underlying warrants already held by the
selling stockholders.

(2) Excludes 961,257 shares of common stock underlying warrants already held by
the selling stockholders, and includes 1,700,000 shares of our common stock
that were cancelled as the result of the disposal of our subsidiary,
Logical Imaging Solutions, Inc..

To the extent proceeds are not required in the amount(s) outlined for the
purposes described hereafter, such proceeds will be used for general corporate
purposes. Our intended uses of the proceeds are listed below in descending order
of priority:

For accounts payable and other corporate and offering expenses:............... $ 1,000,000
To retire debt:............................................................... 350,000
To retire debt:............................................................... 1,050,000
To acquire capital assets:.................................................... 1,500,000
For other general corporate purposes including working capital................ $5,550,000

Our executive offices are located at: 4350 Peachtree Industrial Boulevard, Suite
100, Norcross, Georgia 30071 and our telephone number is: (770) 840-1090.

RISK FACTORS

Investing in our common stock involves a significant degree of risk. You should
carefully consider the following risk factors and all the other information
contained in this prospectus before investing in our common stock. If any of the
following possible adverse events actually occur, our business, financial
condition and results of operations could suffer, in which case the trading
price of our common stock may decline.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND INFORMATION CONCERNING
FORWARD-LOOKING STATEMENTS

Statements contained in this report which are not statements of historical fact
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements may be identified by the use of forward-looking
terms such as "believes," "expects," "may", "will," "should" or "anticipates" or
by discussions of strategy that involve risks and uncertainties. From time to
time, we have made or may make forward-looking statements, orally or in writing.
These forward-looking statements include statements regarding our ability to
borrow funds from financial institutions or affiliates, to engage in sales of
our securities, our intention to repay certain borrowings from future sales of
our securities or cash flow, the ability to expand capacity by placing in
service additional manufacturing equipment during 2002 and 2003, our ability to
increase our toner manufacturing capacity following the completion of testing,
our expected acquisition of business or technologies, our expectation that
shipments to international customers will continue to account for a material
portion of net sales, anticipated future revenues, the prospective effects of
discontinuing the Logical Imaging Solutions operations, sales, operations,
demand, technology, products, business ventures, major customers, major
suppliers, retention of key officers, management or employees, competition,
capital expenditures, credit arrangements and other statements regarding matters
that are not historical facts, involve predictions which are based upon a number
of future conditions that ultimately may prove to be inaccurate. Our actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Forward-looking
statements are made based upon management's current expectations and beliefs
concerning future developments and their potential effects upon our business. We
cannot predict whether future developments affecting us will be those
anticipated by management, and there are a number of factors that could
adversely affect our future operating results or cause our actual results to
differ materially from the estimates or expectations reflected in such
forward-looking statements, including without limitation, those discussed in the
sections titled "Color Imaging" and "Management's Discussion and Analysis" and
the factors set forth below:

RISKS RELATED TO OUR BUSINESS:

OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF CUSTOMERS.

In the nine months ended September 30, 2002, two customers accounted for
approximately 70% of our net sales. We do not have contracts with these
customers and all of the sales to them are made through purchase orders. While
our products typically go through the customer's required qualification process,
which we believe gives us an advantage over other suppliers, this does not
guarantee that the customer will continue to purchase from us. The loss of
either of these customers, including through an acquisition, other business
combination or the loss by them of business from their customers could have a
substantial and adverse effect on our business. We have in the past, and may in
the future, lose one or more major customers or substantial portions of our
business with one or more of our major customers. If we do not sell products or
services to customers in the quantities anticipated, or if a major customer
reduces or terminates its relationship with us, market perception of our
products and technology, growth prospects, and financial condition and results
of operation could be harmed.

APPROXIMATELY 51% OF OUR BUSINESS DEPENDS ON A SUPPLIER APPROVED BY ONE OF OUR
CUSTOMERS.

Some of our products incorporate technologies that are available from a
particular supplier that has been approved by one of our customers.
Approximately 51% of our sales for the nine months ended September 30, 2002 were
derived from products limited to a specific supplier. For the nine months ended
September 30, 2002, we purchased 47% of our raw materials, components and
supplies from that same supplier. We do not have a written agreement with this
or any other supplier. We rely on purchase orders. Should we be unable to obtain
the necessary materials from this supplier, product shipments could be prevented
or delayed, which could result in a loss of sales. If we are unable to fulfill
existing orders or accept new orders because of a shortage of materials, we may
lose revenues and risk losing customers.

OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO UTILIZE AVAILABLE MANUFACTURING
CAPACITY.

From 1999 through 2000, we expanded our manufacturing capacity by acquiring new
manufacturing equipment and moving to a larger location. We intend to continue
to expand capacity by placing in service additional manufacturing equipment

during 2002 and 2003. To fully utilize these new additions to the factory, new
formulations for toner have to be developed specifically for manufacture on this
new equipment or orders for larger quantities of existing toners must be
obtained. While we have been successful in developing formulas for new equipment
in the past and increasing sales of many of our existing toner products, our
continued success will be dependent on our ability to develop additional
formulations or increase our sales from existing formulations and manufacture
the toners with the new equipment to achieve a reduction in production costs. We
cannot assure you that we will be successful in developing all of the
formulations needed in the future or that we will be able to manufacture toner
at a lower production cost on a regular basis or that such products will achieve
market acceptance. If we are not successful in increasing the sales of our
manufactured products, or if our existing sales from manufactured products
declines, our business will be materially and adversely affected.

OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO SUCCESSFULLY DEVELOP, OR ACQUIRE FROM
THIRD PARTIES, PRODUCTS THAT WE CAN COMMERCIALIZE AND THAT ACHIEVE MARKET
ACCEPTANCE.

The challenges we face in implementing our business model include establishing
market acceptance of existing products and services and successfully developing
or acquiring new product lines that achieve market acceptance. We must
successfully commercialize the products that are currently being developed, such
as our color and magnetic character recognition toner for printers and black
text and color toners for new digital copiers and continue to acquire from third
parties parts, materials and finished product that can be integrated into
finished products or sold as our products. While we have successfully developed
toners in the past and are in the late stages of developing and testing several
new toners, we have not commercialized many of the toners that are under
development. While we have in the past acquired from third parties materials and
products that we have been successful in selling, there can be no assurance that
parts, materials or products for new products will be available or will achieve
market acceptance. If we fail to successfully commercialize products we develop
or acquire from third parties, or if these products fail to achieve market
acceptance, our financial condition and results of operation would be seriously
harmed.

WE ANTICIPATE THAT WE WILL NEED TO RAISE ADDITIONAL CAPITAL OR OBTAIN FUNDING TO
FINANCE CERTAIN OF OUR PLANNED FINANCING AND INVESTING ACTIVITIES OVER THE NEXT
TWELVE MONTHS.

Our failure to raise additional capital in the approximate amount of $2,000,000
may significantly limit our ability to prepay some of our debt and finance
certain planned investing activities over the next twelve months that we believe
will improve quality, generate additional revenues and reduce manufacturing and
operating costs. Specifically, we plan to raise additional funds to prepay
approximately $1,400,000 of debt and are considering the acquisition of an
additional planned $600,000 of capital equipment for use in research and
development, quality assurance and manufacturing our toner products. We may not
be able to raise the additional funds, and our failure to obtain additional
funds would significantly limit or eliminate our ability to conduct the
foregoing activities. We anticipate that we will seek additional funding through
the public or private sales of our securities and/or through commercial or
private financing arrangements, including borrowing from affiliates. Adequate
funds may not be available when needed or on terms acceptable to us, or at all.
In the event that we are not able to obtain additional funding on a timely
basis, we may be required to limit any proposed debt prepayment, quality
improvements, operational efficiencies, research and development or expansion.

OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP OR ACQUIRE INTELLECTUAL PROPERTY
RIGHTS.

Our success depends in part on our ability to develop proprietary toner formulas
and manufacturing processes, obtain copyrights and trademarks, maintain trade
secret protection and operate without infringing the proprietary rights of
others. Future claims of intellectual property infringement could prevent us
from obtaining technology of others and could otherwise adversely affect our
operating results, cash flows, financial position or business, as could expenses
incurred enforcing intellectual property rights against others or defending
against claims that our products infringe the intellectual property rights of
others.

OUR ACQUISITION STRATEGY MAY PROVE UNSUCCESSFUL.

We intend to pursue acquisitions of businesses or technologies that management
believes complement or expand the existing business. Acquisitions of this type
involve a number of risks, including the possibility that the operations of any
businesses that are acquired will be unprofitable or that management attention
will be diverted from the day-to-day operation of the existing business. An
unsuccessful acquisition could reduce profit margins or otherwise harm our
financial condition, by, for example, impairing liquidity and causing
non-compliance with lending institution's financial covenants. In addition, any
acquisition could result in a dilutive issuance of equity securities, the
incurrence of debt or the loss of key employees. Certain benefits of any
acquisition may depend on the taking of one-time or recurring accounting charges
that may be material. We cannot predict whether any acquisition undertaken by us
will be successfully completed or, if one or more acquisitions are completed,
whether the acquired assets will generate sufficient revenue to offset the
associated costs or other adverse effects.

OUR INTELLECTUAL PROPERTY PROTECTION IS LIMITED.

We do not rely on patents to protect our proprietary rights. We do rely on a
combination of laws such as trade secrets and contractual restrictions such as
confidentiality agreements to protect proprietary rights. Despite any
precautions we have taken:

o laws and contractual restrictions might not be sufficient to prevent
misappropriation of our technology or deter others from developing
similar technologies; and

o policing unauthorized use of our products is difficult, expensive and
time-consuming and we might not be able to determine the extent of
this unauthorized use.

Therefore, there can be no assurance that we can meaningfully protect our rights
in such unpatented proprietary technology or that others will not independently
develop substantially equivalent proprietary products or processes or otherwise
gain access to the proprietary technology. Reverse engineering, unauthorized
copying or other misappropriation of our proprietary technology could enable
third parties to benefit from our technology without paying us which could
significantly harm our business.

ACTS OF DOMESTIC TERRORISM AND WAR HAVE IMPACTED GENERAL ECONOMIC CONDITIONS AND
MAY IMPACT THE INDUSTRY AND OUR ABILITY TO OPERATE PROFITABLY.

On September 11, 2001, acts of terrorism occurred in New York City and
Washington, D.C. On October 7, 2001, the United States launched military attacks
on Afghanistan. As a result of those terrorist acts and acts of war, there has
been a disruption in general economic activity. The demand for printing products
and services may decline as layoffs in the transportation and other industries
affect the economy as a whole. There may be other consequences resulting from
those acts of terrorism, and any others which may occur in the future, including
civil disturbance, war, riot, epidemics, public demonstration, explosion,
freight embargoes, governmental action, governmental delay, restraint or
inaction, quarantine restrictions, unavailability of capital, equipment,
personnel, which we may not be able to anticipate. These terrorist acts and acts
of war may continue to cause a slowing of the economy, and in turn, reduce the
demand of printing products and services, which would harm our ability to make a
profit. We are unable to predict the long-term impact, if any, of these
incidents or of any acts of war or terrorism in the United States or worldwide
on the U.S. economy, on us or on the price of our common stock.

WE DEPEND ON THE EFFORTS AND ABILITIES OF CERTAIN OFFICERS AND DIRECTORS TO
CONTINUE OUR OPERATIONS AND GENERATE REVENUES.

Our success depends to a significant extent on the continued services of senior
management and other key personnel. While we do have employment, non-compete and
confidentiality agreements with executive officers and certain other key
individuals, employment agreements may be terminated by either party upon giving
the required notice. The loss of the services of any of our executive officers
or other key employees could harm our business. Our success also depends on our
ability to attract, retain and motivate highly skilled employees. Competition
for qualified employees in the industries in which we operate is intense. If we
fail to hire and retain a sufficient number of qualified employees, our business
will be adversely affected.

COMPLIANCE WITH GOVERNMENT REGULATIONS MAY CAUSE US TO INCUR UNFORESEEN
EXPENSES.

Our black text, color and magnetic character toner supplies and manufacturing
operations are subject to domestic and international laws and regulations,
particularly relating to environmental matters that impose limitations on the
discharge of pollutants into the air, water and soil and establish standards for
treatment, storage and disposal of solid and hazardous wastes. In addition, we
are subject to regulations for storm water discharge, and as a requirement of
the State of Georgia have developed and implemented a Storm Water Pollution
Prevention Plan. We are also required to have a permit issued by the State of
Georgia in order to conduct various aspects of our business. Compliance with
these laws and regulations has not in the past had a material adverse affect on
our capital expenditures, earnings or competitive position. There can be no
assurance, however, that future changes in environmental laws or regulations, or
in the criteria required to obtain or maintain necessary permits, will not have
a material adverse affect on our operations.

WE SELL A SIGNIFICANT PORTION OF OUR PRODUCTS INTERNATIONALLY, WHICH EXPOSES US
TO CURRENCY FLUCTUATIONS AND COLLECTION AND PRODUCT RECALL RISKS.

We sell a significant amount of product to customers outside of the United
States. International sales accounted for 40% of net sales in the nine months
ended September 30, 2002 and 23% in the nine months ended September 30, 2001. We
expect that shipments to international customers will continue to account for a
material portion of net sales. Most products are priced in U.S. dollars, but

because we do sell products in Europe denominated in Euros, fluctuations in the
Euro could also cause our products there to become less affordable or less
competitive or we may sell some products at a loss to otherwise maintain
profitable business from a customer. Most of our products sold internationally,
those sold to our larger international customers, are on open account, giving
rise to the added costs of collection in the event of non-payment. Further,
should a product shipped overseas be defective, Color Imaging would experience
higher costs in connection with a product recall or return and replacement. We
cannot assure you that these factors will not have a material adverse effect on
our international sales and would, as the result, adversely impact our results
of operation and financial condition.

OUR QUARTERLY OPERATING RESULTS FLUCTUATE AS A RESULT OF MANY FACTORS.

Our quarterly operating results fluctuate due to various factors. Some of these
factors include the mix of products sold during the quarter, the availability
and costs of raw materials or components, the costs and benefits of new product
introductions, and customer order and shipment timing. Because of these factors,
our quarterly operating results are difficult to predict and are likely to vary
in the future.

RISKS RELATING TO OUR INDUSTRY:

WE OPERATE IN A COMPETITIVE AND RAPIDLY CHANGING MARKETPLACE.

There is significant competition in the toner and consumable imaging products
industry in which we operate. In addition, the market for digital color printers
and copiers and related consumable products is subject to rapid change and the
OEM technologies are becoming increasingly difficult barriers to market entry.
Many competitors, both OEMs and other after market firms, have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we do. These competitors
may be able to devote substantially more resources to developing their business
than we can. Our ability to compete depends upon a number of factors, including
the success and timing of product introductions, marketing and distribution
capabilities and the quality of our customer support. Some of these factors are
beyond our control. In addition, competitive pressure to develop new products
and technologies could cause our operating expenses to increase substantially.

OUR PRODUCTS HAVE SHORT LIFE CYCLES AND ARE SUBJECT TO FREQUENT PRICE
REDUCTIONS.

The markets in which we operate are characterized by rapidly evolving and
increasingly difficult technologies, frequent new product introductions and
significant price competition. Consequently, our products have short life
cycles, and we must frequently reduce prices in response to product competition.
Our financial condition and results of operations could be adversely affected if
we are unable to manufacture new and competitive products in a timely manner.
Our success depends on our ability to develop and manufacture technologically
advanced products, price them competitively, and achieve cost reductions for
existing products. Technological advances require sustained research and
development efforts, which may be costly and could cause our operating expenses
to increase substantially.

OUR FINANCIAL PERFORMANCE DEPENDS ON OUR ABILITY TO SUCCESSFULLY MANAGE
INVENTORY LEVELS, WHICH IS AFFECTED BY FACTORS BEYOND OUR CONTROL.

Our financial performance depends in part on our ability to manage inventory
levels to support the needs of new and existing customers. Our ability to
maintain appropriate inventory levels depends on factors beyond our control,
including unforeseen increases or decreases in demand for our products and
production and supply difficulties. Demand for our products can be affected by
product introductions or price changes by competitors or by us, the life cycle
of our products, or delays in the development or manufacturing of our products.
Our operating results and ability to increase the market share of our products
may be adversely affected if we are unable to address inventory issues on a
timely basis.

RISKS RELATING TO OWNING OUR COMMON STOCK:

OUR OFFICERS AND DIRECTORS OWN APPROXIMATELY 46.4% OF THE OUTSTANDING SHARES OF
COMMON STOCK AND THEY AND OTHER AFFILIATES WILL BE ALLOWED TO PURCHASE UP TO $7
MILLION OF OUR COMMON STOCK IN OUR OFFERING, ALLOWING THESE STOCKHOLDERS TO
CONTROL MATTERS REQUIRING APPROVAL OF THE STOCKHOLDERS.

As a result of such ownership, and potential increased ownership, our officers
and directors, other investors will have limited control over matters requiring
approval by the stockholders, including the election of directors. Such
concentrated control may also make it difficult for the stockholders to receive
a premium for their shares of our common stock in the event we enter into
transactions that require stockholder approval. In addition, certain provisions
of Delaware law could have the effect of making it more difficult or more
expensive for a third party to acquire, or of discouraging a third party from
attempting to acquire control of us.

EXERCISE OF WARRANTS AND OPTIONS WILL DILUTE EXISTING STOCKHOLDERS AND COULD
DECREASE THE MARKET PRICE OF OUR COMMON STOCK.

As of January 17, 2003, we had issued and outstanding 8,437,965 shares of common
stock and 961,257 outstanding warrants and 945,000 outstanding options to
purchase additional shares of common stock. The existence of the remaining
warrants and options may adversely affect the market price of our common stock
and the terms under which we obtain additional equity capital.

OUR ABILITY TO RAISE ADDITIONAL CAPITAL THROUGH THE SALE OF OUR SECURITIES MAY
BE HARMED BY COMPETING RESALES OF OUR COMMON STOCK BY OUR STOCKHOLDERS.

The price of our common stock could fall if stockholders sell substantial
amounts of our common stock. Such sales could make it more difficult for us to
sell securities at the time and price we deem appropriate. To the extent
stockholders, including the selling stockholders, offer and sell their shares of
common stock to investors for less than the price offered by us, our attempt to
sell our securities may be adversely affected as a result of the concurrent
offering by selling stockholders. Investors may negotiate prices lower than the
price we are offering our shares of common stock with selling stockholders.
Furthermore, potential investors may not be interested in purchasing shares of
our common stock on any terms if stockholders sell substantial amounts of our
common stock.

EFFECTIVENESS OF OUR REGISTRATION STATEMENT ON FORM SB-2 MAY RESULT IN THE
DILUTION OF EXISTING STOCKHOLDERS AND COULD DECREASE THE MARKET PRICE OF OUR
COMMON STOCK.

As a result of our registration statement being declared effective, selling
stockholders will be able to sell up to approximately 4 million shares of our
common stock and we will be able to sell the equivalent of up to 7 million
shares of our common stock. The sale of common stock covered by the registration
statement by us or selling stockholders will dilute existing stockholders and
may adversely affect the market price of our common stock.

WE MAY FACE POTENTIAL REGULATORY ACTION OR LIABILITY IN CONNECTION WITH OUR 2001
PRIVATE PLACEMENT.

Our issuance of common stock and warrants in a private placement which was
completed in 2001 could subject us to potential adverse consequences, including
securities law liability and the voiding of contracts entered into in connection
with the private placement. If our activities or the activities of other parties
in the 2001 private placement are deemed to be inconsistent with securities laws
under Section 29 of the Securities Exchange Act of 1934 or our activities or the
activities or the activities of other parties are deemed to be inconsistent with
the broker dealer registration provisions of Section 15(a) of the Exchange Act:

o we may be able void our obligation to pay transaction-related fees in
connection with the private placement and we may receive reimbursement
for fees already paid;

o persons with whom we have entered into securities transactions that
are subject to these transaction-related fees may have the right to
void these transactions; and

o we may be subject to regulatory action.

Due to the inherent uncertainties involved with the interpretation of securities
laws, we are unable to predict the following: the validity of any potential
liability in connection with our private placement, the outcome of any
regulatory action or potential liability or the outcome of voiding transactions
in connection with the private placement. The defense of any regulatory action
or litigation and any adverse outcome could be costly and could have a material
adverse effect on our financial position and results of operations and could
divert management attention.

DIGITAL COLOR PRINT'S INTENDED TENDER OFFER TO EXCHANGE ITS SHARES FOR UP TO
900,000 SHARES OF OUR COMMON STOCK MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR
COMMON STOCK.

Digital Color Print's intended tender offer to exchange shares for up to 900,000
shares of our common stock could result in Digital Color Print having up to
900,000 shares of our common stock that it could sell in the market. The sale of
all or substantially all of such shares of our common stock by Digital Color
Print may adversely affect the market price of our common stock.

OUR COMMON STOCK IS LISTED ON THE OVER-THE-COUNTER (OTC) BULLETIN BOARD, WHICH
MAY MAKE IT MORE DIFFICULT FOR STOCKHOLDERS TO SELL THEIR SHARES AND MAY CAUSE
THE MARKET PRICE OF OUR COMMON STOCK TO DECREASE.

Because our common stock is listed on the OTC Bulletin Board, the liquidity of
our common stock is impaired, not only in the number of shares that are bought
and sold, but also through delays in the timing of transactions, and limited
coverage by security analysts and the news media, if any, of us. As a result,
prices for shares of our common stock may be lower than might otherwise prevail
if our common stock was traded on NASDAQ or a national securities exchange, like
the American Stock Exchange.

OUR STOCK PRICE MAY BE VOLATILE AND AN INVESTMENT IN OUR COMMON STOCK COULD
SUFFER A DECLINE IN VALUE.

The market price of our common stock may fluctuate significantly in response to
a number of factors, some of which are beyond our control. These factors
include:

o progress of our products through development and marketing;

o announcements of technological innovations or new products by us or
our competitors;

o government regulatory action affecting our products or competitors'
products in both the United States and foreign countries;

o developments or disputes concerning patent or proprietary rights;

o actual or anticipated fluctuations in our operating results;

o the loss of key management or technical personnel;

o the loss of major customers or suppliers;

o the outcome of any future litigation;

o changes in our financial estimates by securities analysts;

o fluctuations in currency exchange rates;

o general market conditions for emerging growth and technology
companies;

o broad market fluctuations;

o recovery from natural disasters; and

o economic conditions in the United States or abroad.

OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY HAVE THE EFFECT OF MAKING IT MORE
EXPENSIVE OR MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE, OR TO ACQUIRE CONTROL,
OF US.

Our certificate of incorporation makes it possible for our board of directors to
issue preferred stock with voting or other rights that could impede the success
of any attempt to change control of us. Our certificate of incorporation and
bylaws eliminate cumulative voting which may make it more difficult for a
minority stockholder to gain a seat on our board of directors and to influence
board of directors' decision regarding a takeover. Delaware Law prohibits a
publicly held Delaware corporation from engaging in certain business
combinations with certain persons, who acquire our securities with the intent of
engaging in a business combination, unless the proposed transaction is approved
in a prescribed manner. This provision has the effect of discouraging
transactions not approved by our board of directors as required by the statute
which may discourage third parties from attempting to acquire us or to acquire
control of us even if the attempt would result in a premium over market price
for the shares of common stock held by our stockholders.

The information referred to above should be considered by investors when
reviewing any forward-looking statements contained in this report, in any of our
public filings or press releases or in any oral statements made by us or any of
our officers or other persons acting on our behalf. The important factors that
could affect forward-looking statements are subject to change, and we disclaim
any obligation or duty to update or modify these forward-looking statements.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of 7,000,000 shares offered by
us will be $9,150,000, assuming a purchase price of $1.35 per share for the
average of the 15 trading days prior to the effective date of this offering, and
after deducting the approximate offering expenses of $300,000.

The selling stockholders will receive all of the proceeds from selling their
shares. We will not receive any sales proceeds. Some of the shares to be sold
are already owned by the selling stockholders, and the remainder are issuable to
them upon exercise of warrants. See "Selling Stockholders." We will only receive
proceeds upon the exercise of these warrants, to the extent they were exercised
other than cashless. The total amount we will receive if all of the warrants
held by the selling stockholders were exercised is approximately $1,922,514
(assuming that such selling stockholders do not utilize a cashless exercise). We
have not made any plans for the use of these proceeds other than to add them to
working capital.

The table below represents our best estimate of the allocation of the net
proceeds, including the priorities for the use of the proceeds in descending
order, based upon our current business plan and current economic and industry
conditions and is subject to reapportionment among the categories listed below
in response to changes in our plans, regulations, industry conditions and future
revenue and expenditures. The amount and timing of expenditures will vary
depending on a number of factors, including changes in our contemplated
operations or business plan and changes in economic or industry conditions.

Accounts payable and corporate expenses, including expenses of the offering $ 1,000,000
To retire debt(1) 350,000
To retire debt(2) 1,050,000
Acquisition of production equipment for dedicated color toner manufacturing
and research and development 1,500,000
Other general corporate purposes, including working capital 5,550,000
-------------
Total $ 9,450,000

----------------

(1) On November 30, 2000, we entered into a loan for $500,000 with a 5-year
term, secured by specific manufacturing equipment, maturing November 30,
2004, with General Electric Capital Corporation for the purchase of toner
manufacturing equipment. The interest rate is 10.214% and the monthly
principal and interest payments are $10,676.39.

(2) On June 24, 1999, we entered into a loan for $1,752,000 with a 7-year term,
secured by our business assets, maturing June 24, 2006, with SouthTrust
Bank for the refinancing of obligations owing the bank for the acquisition
of equipment and that due under a previous working capital line of credit.
The interest rate is 7.90% per annum and the monthly principal and interest
payments are $27,205.00.

Pending application of the proceeds of our offering, we intend to temporarily
reduce our revolving line of credit with our bank and otherwise invest the net
proceeds in certificates of deposit, money market accounts, United States
Government obligations or other short-term interest bearing obligations of
investment grade.

We believe that the net proceeds of our offering will be sufficient to meet our
needs and certain planned operating and investing activities in the next twelve
months. See "Risk Factors."

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2002,
without adjusting for the effect of the sale by us of all of the shares offered
by us. The table should be read in conjunction with the financial statements and
notes thereto appearing elsewhere in this prospectus.

ACTUAL
-----------
Total current liabilities $6,757,674
Long-term debt: 4,898,318
-----------
Total Liabilities 11,655,992

Stockholders' equity: common stock par value $.01,
20,000,000 shares authorized; 8,437,965 outstanding: 84,380
Additional paid-in capital 7,205,908

Accumulated deficit (2,103,702)
-----------
Total Stockholders' Equity 5,186,586
-----------
Total Liability and Stockholders' Equity 16,842,578
===========

COLOR IMAGING, INC.

OVERVIEW

Color Imaging, Inc., formerly known as Advatex Associates, Inc., was
incorporated in Delaware in 1987. On May 16, 2000, Advatex, Logical Acquisition
Corp., Color Acquisition Corp., Logical Imaging Solutions, Inc. and Color Image,
Inc. entered into a Merger Agreement and Plan of Reorganization pursuant to
which Logical Acquisition Corp. merged with and into Logical Imaging Solutions
and Color Acquisition Corp. merged with and into Color Image. Pursuant to the
Merger Agreement, stockholders of Logical Imaging Solutions and Color Image
exchanged their shares for shares of common stock of Advatex. Logical Imaging
Solutions stockholders converted their shares into shares of common stock of
Advatex at the ratio of 1.84843 shares of common stock of Advatex for each one
share of Logical Imaging Solutions. Color Image stockholders converted their
shares into shares of common stock of Advatex at the ratio of 15 shares of
common stock of Advatex for each one share of Color Image. Following the
conversion of shares by Logical Imaging Solutions and Color Image stockholders,
stockholders of Logical Imaging Solutions and Color Image owned approximately
85% of the outstanding shares of common stock of Advatex and stockholders of
Advatex before the merger owned approximately 15% and Logical Imaging Solutions
and Color Image became wholly-owned subsidiaries of Advatex. The purpose of the
merger was to combine Color Image's toner and consumable expertise and
manufacturing plant with Logical Imaging Solutions' advanced printing system
capabilities to offer a wider product range and ensure product supply for
Logical Imaging Solutions' Solution Series printing systems. Management also
anticipated that the merger with a company that was subject to the Securities
Exchange Act of 1934 would also permit the reorganized business to offer shares
to other acquisition candidates, in lieu of cash.

On July 7, 2000, pursuant to a vote of our stockholders, we changed our name to
Color Imaging, Inc. On December 31, 2000, Color Image, Inc. was merged with and
into Color Imaging, Inc. On September 11, 2002, we entered into a share exchange
agreement with Digital Color Print, Inc. and four of our directors to divest our
wholly owned subsidiary, Logical Imaging Solutions. On September 30, 2002, the
share exchange transaction for the disposal of Logical Imaging Solutions was
completed. See "Color Imaging, Inc. - Recent Developments" beginning on page 11.

We develop, manufacture and market products used in electronic printing,
facsimile machines and analog and digital copiers. We formulate, develop,
manufacture, purchase from others and market electronic printing products,
including black text, color, magnetic character recognition and specialty
toners, and provide other parts and accessories for laser printers and analog
and digital copiers.

COLOR IMAGING

Since 1989, Color Imaging has developed, manufactured and marketed products used
in electronic printing, facsimile machines and photocopying. Color Imaging
formulates and manufactures black text and specialty toners, including color and
magnetic character recognition toners for numerous laser printers and a number
of facsimile machines and analog and digital photocopiers. Color Imaging's
toners permit the printing of a wide range of user-selected colors and also the
full process color printing of cyan, yellow, magenta and black. Magnetic
character recognition toners enable the printing of magnetic characters that are
required for the high-speed processing of checks and other financial documents.
Color Imaging also supplies other consumable products used in electronic
printing and photocopying, including toner cartridges, cartridge components,
photoreceptors and imaging drums.

Color Imaging has continually expanded its product line and manufacturing
capabilities. This expansion has led to the creation of more than 130 different
black text, color, magnetic character recognition and specialty toner
formulations, including aftermarket toners and imaging products for printers and
facsimile machines manufactured by Brother(TM), Canon(TM), Delphax(TM), Hewlett
Packard(TM), IBM(TM), Lexmark(TM), Sharp(TM), Xerox(TM), Minolta(TM), Mita(TM),
Panafax(TM), Pentax(TM), Pitney Bowes(TM), Epson(TM), Fuji-Xerox(TM),
Toshiba(TM), Kyocera(TM), Okidata(TM), Panasonic(TM), and printing systems
developed by Logical Imaging Solutions. Color Imaging also manufacturers and or
markets toners for use in Ricoh, Sharp(TM), Xerox(TM), Canon(TM), Lanier(TM) and
Toshiba(TM) copiers. Color Imaging also offers product enhancements, including
imaging supplies that enable standard laser printers to print magnetic character
recognition data. Color Imaging markets branded products directly to OEMs and
its aftermarket products worldwide to distributors and remanufacturers of laser
printer toner cartridges and to dealers and distributors of copier products.

MARKET OVERVIEW

Color Imaging's market for imaging products is the installed base of electronic
printing devices: laser printers and facsimile machines and analog and digital
copiers. Color Imaging competes within this market with products supplied by the
OEM manufacturers and with other suppliers of aftermarket imaging products.
Additional products in this category include enhancement products that extend
the capabilities of the OEM's product, such as magnetic character recognition
toners that enable the printing of magnetic characters on checks and other
financial documents. We market our products worldwide and regionally primarily
to distributors of imaging products who sell to dealers and large end-users. To
a lesser extent, we sell to OEMs, remanufacturers and a few dealers directly.

STRATEGY

Our operating strategy is to expand, including through strategic acquisition(s),
our printer and copier products business. We intend to expand our printer and
copier business by increasing the capacity of our toner manufacturing facility
and utilize it, increasingly, for higher margin specialty, magnetic character
recognition, copier and color toners and by expanding our sources for products
from strategic suppliers that we can add value to or resell that complement our
product lines.

The key elements of our imaging products strategy include expanding toner
product offerings, increasing vertical integration by supplying complete toner
and cartridge devices, capitalizing on the expertise of producing specialty
toners, exploiting the efficiencies associated with the investment made in new
manufacturing facilities and expanding into new geographic markets, and
broadening our sales channels.

Color Imaging's development of new toner products is focused on providing an
aftermarket product for electronic printing devices that achieves a high level
of market acceptance. Color Imaging endeavors to offer equivalent toner products
with equal or better quality at lower prices than the OEM's toner product.

Color Imaging is committed to increasing the value added of its toner products
to the end user by providing not only the toners but also the toner cartridge or
canister that is compatible with the OEM's equipment. Color Imaging believes
that by developing toner cartridge and canister devices for specific electronic
printing or copying machines, and integrating those devices with compatible
toners, the market for Color Imaging's toner products will expand. Color Imaging
believes that this approach will also result in increased gross margins.

Color Imaging will continue to emphasize its high margin specialty toner
capability, primarily color and magnetic character recognition toners, while
providing lower margin black text toners in commodity bulk to a number of large
customers. The bulk quantity of black text toners is required to maximize the
efficiencies of Color Imaging's manufacturing plant and justify the capital
investment in the production equipment. The availability of this complete
manufacturing process and equipment allows for the continued expansion of
specialty toner products.

RECENT DEVELOPMENTS

On June 10, 2002, the board of directors, to better focus executive management
energies on each of our operating units, reaffirmed Director Michael W. Brennan
as Chairman and Chief Executive Officer of our subsidiary Logical Imaging
Solutions, Inc., and elected Jui-Hung Wang Chairman of Color Imaging, Inc. Dr.
Sueling Wang continues to serve as Vice-Chairman and President of Color Imaging,
Inc. Mr. Brennan also resigned from the board of directors of Color Imaging
effective September 10, 2002, to dedicate himself to the furthering of the
business interests of Logical Imaging Solutions, including the potential
reorganization of it as a standalone company separate and apart from Color
Imaging. The board of directors and management realized that the difficulties
surrounding the raising of significant equity capital from non-affiliates for
Color Imaging in this market environment is such that a restructure of Logical
Imaging Solutions had to be considered. We did not, at that time, specifically
allocate any of the proceeds of our pending offering filed with the Securities
and Exchange Commission on Form SB-2 to the furthering of Logical Imaging
Solutions' technology, since we were considering several alternatives with
regard to the potential restructuring of Logical Imaging Solutions.

Four of our directors, Messrs. Brennan, St. Amour, Langsam and Hollander
expressed concern over the potential restructure or reorganization of Logical
Imaging Solutions and the lack of the planned use of any proceeds from our
offering pending the Securities and Exchange Commission on Form SB-2 for the
further development of its technology, as they are of the opinion that Logical
Imaging Solutions' business prospects demanded a greater investment. After
informal discussion with Dr. Sueling Wang and Mr. Van Asperen beginning this
past July, they submitted an informal proposal whereby a new company, Digital
Color Print, Inc., to be initially owned by Messrs. Brennan, St. Amour, Langsam
and Hollander, would acquire the capital stock of Logical Imaging Solutions in
exchange for shares of our common stock and warrants to purchase shares of the
common stock of Logical Imaging Solutions and/or Digital Color Print
approximating up to 15% of its then outstanding shares.

During the initial negotiations Messrs. Brennan, St. Amour, Langsam and
Hollander offered to acquire Logical Imaging Solutions at a price equivalent to
the net book value of Logical Imaging Solutions, after converting intercompany
advances to capital, such that Color Imaging did not incur a loss on the
transaction, and Color Imaging was to receive the number of shares of its common
stock, at the market price at closing, equivalent to that amount. At the time of
the initial discussions, the market price had averaged approximately $1.65/share
and Color Imaging was to have received about 1,333,000 shares, subject to
adjustment should the market price change.

As negotiations continued, numerous terms and conditions were discussed,
including a minimum and maximum number of shares of Color Imaging's stock that
was to be exchanged at closing based on the then market price. Given the
difficulty of establishing a market price that could be agreed upon, and the
resultant minimum and maximum number of our shares to be exchanged for the
shares of Logical Imaging Solutions, it was then agreed that Color Imaging would
accept 1,600,000 of its shares which at the then market price was roughly
equivalent to Color Imaging's estimated fair value of the transaction: the fair
value (approximating the net book value of Logical Imaging Solutions, after
converting intercompany advances to capital) plus the transaction costs. Later,
when Messrs. Brennan, St. Amour, Langsam and Hollander wanted a minimum of
$100,000 of cash to be on hand for Logical Imaging Solutions, and not in the
form of a loan, the number of shares to be received was increased from 1.6
million to 1.7 million. In addition, Mr. Brennan agreed that his employment
agreement would be immediately terminated upon the transaction's closing and
severance of $6,057.69 per two-week period, plus reimbursement of health and
life premium costs formerly payable through June 10, 2003 will be terminated as
of March 10, 2003.

On August 23, 2002, the board of directors, by unanimous written consent,
authorized our entering into a definitive share exchange arrangement to be
negotiated by management and appointed a committee of disinterested directors,
Mr. Van Asperen and Mr. Allison, to conduct due diligence as appropriate and to
engage, at their option, an independent consultant to evaluate the fairness,
from a financial point of view, of the transaction. There were also several
important conditions, such as the consent of our bank and the release of the
bank's security interest in the assets of Logical Imaging Solutions, a
recommendation by the committee of disinterested directors with an opinion of an
independent financial consultant of the fairness to Color Imaging and its
stockholders from a financial point of view of the transaction, if obtained, and
the approval to close the transaction of not only a majority of the board of
directors but also of a majority of the disinterested members of board of
directors. On September 11, 2002, after management concluded its negotiations,
we signed the share exchange agreement. The agreement was amended on September
20, 2002 pursuant to which the number of shares of our common stock to be
exchanged for the capital stock of Logical Imaging Solutions was increased from
1.6 million to 1.7 million and a requirement was added that Logical Imaging
Solutions have at least $100,000 on hand at closing and that Mr. Brennan
terminate his employment upon the close of the transaction and his severance
formerly payable through June 10, 2003 terminates as of March 10, 2003.

The Committee of disinterested directors, recognizing that the transaction with
directors of Color Imaging requires approval by a majority of the independent
directors of Color Imaging and receipt of a fairness opinion indicating that the
transaction is fair, from a financial point of view, to Color Imaging and its
stockholders who are unaffiliated with Digital Color Print, engaged CBIZ
Valuation Counselors to render an opinion as to whether the share exchange
agreement was fair. For the purpose of establishing a basis for rendering its
opinion, CBIZ Valuation Counselors, among other things, read the share exchange
agreement and internal memoranda and minutes of the board of directors of Color
Imaging in connection with Logical Imaging Solutions technology and operations,
reviewed the unconsolidated and consolidating financial statements of Color
Imaging, including past and forward looking budgets and projections and general
conditions, visited the facilities and interviewed the managements of both Color
Imaging and Logical Imaging Solutions, analyzed the products and technologies of
Digital Color Print/Logical Imaging Solutions, considered public data, Color
Imaging's stock price history, stock market performance and conducted other
studies and analyses, while relying on the accuracy and completeness of the
financial and other data provided by Color Imaging and Logical Imaging
Solutions.

CBIZ Valuation Counselors analyzed Color Imaging, Logical Imaging Solutions and
the warrant offered by Digital Color Print and Logical Imaging Solutions as a
means of valuing each. The analysis, given the effect to the transaction of
Logical Imaging Solutions, included:

o pro forma adjusted historical earnings,
o the market value of the common stock of each,
o discounted cash flows, and
o capital markets.

Further, CBIZ Valuation Counselors' conclusion noted that the share exchange
agreement was one of many alternatives considered by Color Imaging's management
and its board with respect to the ultimate decision to restructure the
operations of Logical Imaging Solutions.

Color Imaging's 1,700,000 shares and the warrant to purchase approximately 15%
of Digital Color Print or Logical Imaging Solutions common stock to be received
for all of the outstanding common stock of Logical Imaging Solutions was valued
by CBIZ Valuation Counselors in their report to the committee of disinterested

directors of Color Imaging. The CBIZ Valuation Counselors' report indicated a
market value for Color Imaging's common stock ranging from $0.73 to $2.32 per
share for values of approximately $1 million to $3.9 million. The discounted
cash flow analysis resulted in a value of $1.80 per share, or $3.1 million, and
the capital market analysis indicated a value based on the inclusion and
deduction of Color Imaging's long-term debt of from $1.07 to $1.28 per share
which is approximately $1.8 million and $2.2 million. Color Imaging's trailing
20-day average closing price for its common shares was $1.61, indicating a value
of approximately $2.7 million for the shares it was to receive. Including the
value of the warrant to be received by Color Imaging with an approximate value
of $24,000 and not considering the lowest or highest value developed by the
analysis as being as representative of the indicated value as the other values,
the range of the value of its common stock and the warrant it was to receive was
approximately $1.3 million to $3.1 million based on the values determined by the
analysis and $2.7 million based on the 20-day trailing trading average price of
$1.61 for its shares and $2.1 million based on its closing price of $1.25 per
share on September 25, 2002.

On the other hand, the 1,630,000 shares of Logical Imaging Solutions common
stock delivered to Digital Color Print was valued by CBIZ Valuation Counselors
from $.9 million to $2.5 million. CBIZ Valuation Counselors adjusted asset
analyses of Logical Imaging Solutions resulted in a value of approximately $.9
million and $2.5 million, or $.55 and $1.54 per share, respectively. Logical
Imaging Solutions is not publicly traded and did not meet the listing
requirement of the OTCBB and because of factors that included its business plan
relying upon the raising of additional capital and the development of new
products, CBIZ Valuation Counselors did not rely on either the market or income
approaches to valuing the Logical Imaging Solutions' common stock.

The directors, not including the directors acquiring Logical Imaging Solutions,
and the committee of disinterested directors following the completion of its due
diligence and the receipt of a fairness opinion that the share exchange
transaction, as amended, is fair to Color Imaging and its stockholders from a
financial point of view, who were unaffiliated with the stockholders of Digital
Color Print determined that the transaction was fair to Color Imaging and its
stockholders, because they believed that the "fair value" of Logical Imaging
Solutions was likely less than its net book value. Color Imaging and its special
committee believe that Logical Imaging Solutions was possibly, in the near term
and perhaps before year-end, facing a substantial impairment to its two largest
assets:

o the electron beam test fixtures for products that it had yet to
commercialize with a book value of some $1.3 million, and

o the deferred tax asset with a book value of $415,000 that depended
solely on future profitability of Logical Imaging Solutions.

Further, given:

o Logical Imaging Solutions' existing products had not yet achieved
sufficient market acceptance for it to be profitable,
o its development of its primary products is still not completed and it
could not be determined with any certainty that it ever would be
completed or made manufacturable and could be sold profitably once
developed,

o competing technologies continue to advance,
o the company that developed the technology has achieved limited success
after more than 20 years, and
o given all of the foregoing, and the continuing prospects of losses,
negative cash flows and the potential for significantly impaired
assets in connection with Logical Imaging Solutions, the special
committee and the disinterested directors concluded the Share Exchange
Agreement was preferable to other alternative courses of action.

In connection with the share exchange, Mr. Brennan transferred to Digital Color
Print 724,215 shares and Mr. St. Amour, together with his daughter, transferred
to Digital Color Print an aggregate of 1,053,595 shares of Color Imaging common
stock held by them as trustees of certain trusts.

After having met all of the conditions, including the approval of the majority
of the disinterested directors and having obtained a fairness opinion that
indicated the transaction was fair to Color Imaging and its stockholders
unaffiliated with Digital Color Print, the divestiture of Logical Imaging
Solutions and the share exchange was completed on September 30, 2002. Effective
upon the closing, Messrs. St. Amour, Langsam and Hollander resigned as directors
of Color Imaging. Mr. Brennan had previously resigned as a director of Color
Imaging effective September 10, 2002. As the result of the foregoing, Logical
Imaging Solutions' operations and research and development activities will
remain in Santa Ana, California and are not being consolidated with ours at our
headquarters in Norcross, Georgia.

Based upon guidance provided by APB 29 in connection with accounting for
nonmonetary transactions, the 1,700,000 million shares of our common stock
exchanged for all of the shares of common stock of Logical Imaging Solutions was
valued at approximately $2.68 million: the fair value (approximating the net
book value) of Logical Imaging Solutions, after converting approximately $2.35
million of intercompany advances to capital, plus the transaction costs
incurred. The warrants that we received for approximately 15% of Logical Imaging
Solutions, or Digital Color Print, have not been assigned any value, since they
are not cashless, increase from $1.50, to $2.25 and then to $3.25 per share each
year over three years, expire after three years, are not registered for resale
and have no current market.

Now that the share exchange transaction has closed, Digital Color Print intends
to offer to exchange shares of its common stock for shares of common stock held

by our stockholders who are, per a press release of Digital Color Print, holders
of record as of October 1, 2002. We are not sponsoring, encouraging, or
responsible for the proposed offering by Digital Color Print. Conditions of the
share exchange agreement include that Digital Color Print shall be solely
responsible for such offering, including compliance with all applicable laws,
and it shall not accept the tender of more than an aggregate of 2,600,000
shares, inclusive of the 1,700,000 of our common shares that Digital Color Print
exchanged for all of the common stock of Logical Imaging Solutions. If Digital
Color Print completes its intended tender offer for a total of 2.6 million
shares of our issued and outstanding common stock, inclusive of the 1.7 million
exchanged for all of the common stock of Logical Imaging solutions, it will have
900,000 shares of our publicly traded shares which it could sell in the market
to fund its operations. Further, neither Logical Imaging Solutions nor Digital
Color Print shall take any action in connection with their offering that could
have the effect of reducing the number of our stockholders below 325. As of
September 9, 2002, we had 344 holders of record of our common stock.

Color Imaging has completed the testing of recently installed toner
manufacturing equipment to complete our most recent factory expansion to again
double our capacity. This installation represents approximately $1.44 million
investment to not only increase our business, but to also improve quality,
product consistency and to lower costs. Recently we placed orders for $100,000
of additional equipment to be installed before the end of this year to complete
our first dedicated color toner manufacturing system, a system for which we have
already invested some $300,000. In our offering filed with the Securities and
Exchange Commission on Form SB-2, we made provision for $1.5 million of new
capital equipment, most of which is planned for additional dedicated color toner
manufacturing systems for "business color" printing and copying systems being
introduced by OEMs. The remainder of the planned capital investment is to
further improve our toner research, development and quality control programs.

During March 2002, we rescinded two transactions for the sale of our common
stock and warrants to purchase additional shares of our common stock totaling
1,025,000 and 525,000, respectively. The purchasers paid the par value in cash
for the shares issued to them, and the balance of the purchase price consisted
of recourse promissory notes. The sale of 1,000,000 shares of our common stock
and warrants to purchase an additional 500,000 shares of common stock was, per
agreement, subject to our registering the securities for resale. However, the
SEC staff took the position that these securities could not be registered for
resale in this registration statement and the transaction was rescinded, the
shares, warrant and promissory note were cancelled and we retained the $10,000
and accrued interest earned thereon in consideration of our expenses incurred in
connection with the transaction. The second transaction for 25,000 shares of our
common stock and warrants to purchase an additional 25,000 shares of our common
stock was rescinded when the parties believed the promissory note would not be
paid by the time this registration statement became effective. The shares,
warrant and promissory note were cancelled and the cash consideration was
refunded to the purchaser.

With the rescission of the two above-mentioned sales of our common stock
totaling $2,050,000, we anticipate that we will need to raise additional funds
from other sources to fund other planned investing and financing activities. We
intend to meet our operating requirements from funds generated by operations,
funds available under our line of credit agreement and funds we have borrowed
from affiliates. The other planned activities are dependent upon our raising
funds through the sale of our securities. We will allow our directors, officers
and affiliates to purchase up to $7 million of our shares of common stock in
this offering.

PRODUCTS

Our product family net revenues, from continuing operations are:

NET REVENUES FOR THE
--------------------------------------
NINE MONTHS ENDED TWELVE MONTHS ENDED
PRODUCT FAMILY SEPTEMBER 30, 2002 DECEMBER 31, 2001 PRIMARY PRODUCT FUNCTION
---------------------- ---------------- ------------------- -------------------------------
Toner $ 20,116,210 $ 27,069,751 Data-processing, financial
document printing and copying

Laser printer $ 2,169,779 $ 2,900,017 Laser printer cartridge
kits & parts remanufacturing

PRODUCT FAMILY PRODUCTS OR SERVICES
------------------------------ ---------------------------------------------------------------------------------------------
Toner Aftermarket black text, color, specialty and magnetic character recognition toners in bulk,
bottles and cartridges
Laser printer kits & parts Remanufactured cartridges and printer parts for remanufacturing OEM print cartridges

MARKETING AND DISTRIBUTION

We market and distribute our products worldwide through both our direct sales
force and manufacturer's representatives. Color Imaging's products are marketed
primarily to distributors, OEMs and rechargers.

In the nine months ended September 30, 2002 and the twelve months ended December
31, 2001, our sales were primarily generated from the sale of black text, color
and magnetic character recognition toners and related consumable products,
including toner cartridges and the re-filling of certain toner cartridges. For
the nine and twelve month periods ended September 30, 2002 and December 31,
2001, our two largest imaging products customers accounted for 51% and 19% and
41% and 16% of net sales, respectively. During the nine months ended September
30, 2002, there were no sales to our third largest customer of 2001 who
accounted for 12% of 2001 net sales, since these sales were made directly to our
largest customer during 2002. Though our sales are on purchase orders, these
customers typically issue purchase orders three months in advance of the product
delivery date and provide us with an additional two month rolling forecast.
While future orders may vary from the forecasts by as much as 20%, it has been
our experience that the orders generally coincide with the customer's forecast.

COMPETITION

The markets for our products are competitive and subject to rapid changes in
technology. Color Imaging in particular competes principally on the basis of
quality, flexibility and service, and as a full-service provider with a pricing
strategy that reflects quality and reliability.

Color Imaging's competitors in the toner market include large businesses with
significantly greater resources in the high-volume commodity toner market, as
well as smaller companies in the specialty, color and magnetic character toner
markets. In addition, other companies offer remanufactured toner cartridges and
printer parts that are lower priced.

Color Imaging's strategy requires that it continue to develop and market new and
innovative products at competitive prices. New product announcements by Color
Imaging's principal competitors, however, can have, and in the past have had, a
material adverse effect on our financial results. Such new product announcements
can quickly undermine any technological competitive edge that one manufacturer
may enjoy over another and set new market standards for quality, speed and
function. Furthermore, knowledge in the marketplace about pending new product
announcements by Color Imaging's competitors may also have a material adverse
effect on us inasmuch as purchasers of these products may defer purchasing
decisions until the announcement and subsequent testing of such new products.

In recent years, Color Imaging and its principal competitors, which have
significantly greater financial, marketing and technological resources than
Color Imaging, have regularly lowered prices on both printer and copier imaging
supplies and are expected to continue to do so in the future. Color Imaging is
vulnerable to these pricing pressures which, if not mitigated by cost and
expense reductions, may result in lower profitability and could jeopardize Color
Imaging's ability to grow or maintain market share. We expect that, as we
compete more successfully with our larger competitors, our increased market
presence may attract more frequent challenges, both legal and commercial, from
our competitors, including claims of possible intellectual property
infringement.

Canon(TM), Xerox(TM) and Ricoh(TM) are the market leaders in the toner market
whose aggregate sales Color Imaging believes represent approximately 75% to 85%
of worldwide toner sales. As with our other products, if pricing pressures are
not mitigated by cost and expense reductions, Color Imaging's ability to
maintain or build market share and profitability could be adversely affected.

Like certain of Color Imaging's competitors, Color Imaging is a supplier of
laser printer kits and parts. Color Imaging cannot assure you that Color Imaging
will be able to compete effectively for a share of this business. In addition,
Color Imaging cannot assure you that Color Imaging's competitors will not
develop new compatible laser printer products that may perform better or sell
for less than Color Imaging's products. Independent manufacturers compete for
the aftermarket business under either their own brand, private label, or both,
using price, aggressive marketing programs, and flexible terms and conditions to
attract customers. Depending on the product, prices for compatible products
produced by other manufacturers are offered below Color Imaging's prices, in
some cases significantly below Color Imaging's prices.

MANUFACTURING

We operate a toner manufacturing facility in Norcross, Georgia that we moved
into during 1999 and 2000. We have made significant capital investment in this
facility to increase production capacity and improve manufacturing efficiencies
to lower our processing costs of our toner products. The installation of
additional equipment was completed in the second quarter 2002, and the equipment
was placed in service during the fourth quarter of 2002. This equipment is an
integral part of our plan to further increase production capacity, improve
quality and efficiency and to significantly lower the costs of our toner
products. Our goal for the last three years has been to reduce average toner
product costs by one-half, in response to management's assessment of the
continuing price reductions for these products in the marketplace.

MATERIALS

We procure a wide variety of components for use in our manufacturing processes,
including raw materials, such as chemicals and resins, electro-mechanical
components and assemblies. Although many of these components are standard off-
the-shelf parts that are available from multiple sources, we often utilize
preferred supplier relationships to ensure more consistent quality, cost and
delivery. Often Color Imaging's toner formulations are dependent on one or more
materials produced by only one vendor, since the formula was developed based on
that material's unique characteristics. Alternative materials exist, but the
differences in performance characteristics could require Color Imaging to modify
the original formula and/or its manufacturing processes to obtain a marketable
product based on the new material. Further, some components are only available
from one supplier, including certain custom chemicals, application specific
integrated circuits and other semiconductors. In addition, we source some print
engines and other finished products from OEMs. Should these components not be
available from any one of these suppliers, there can be no assurance that
production of certain of our products would not be disrupted. In the event that
these components are not available to us, our production could be disrupted.
Such a disruption could materially harm our business.

RESEARCH AND DEVELOPMENT

Our research and development activities for the past several years have focused
on black text, specialty, color and magnetic character toner formulations, and
the development of electron beam imaging technologies and supplies. Our
commitment to increasing revenues through new product introductions requires
research and development expenditures, innovative designs, significant
development and testing activities and functional solutions.

For the nine months ended September 30, 2002, our research and development
expenditures increased approximately $137,000, or 25%, from approximately
$552,000 for the nine months ended September 30, 2001. Our research and
development expenditures for the twelve months ended December 31, 2001,
increased approximately $240,000, or 44%, to $791,000 in 2001 from $551,000 in
2000. It is necessary to make strategic decisions from time to time as to which
technologies will produce products with the greatest future potential.
Occasionally, a customer will ask Color Imaging to develop toner products for
their exclusive resale, and in that event the customer will generally
financially support Color Imaging's development activities. In turn, Color
Imaging will also occasionally work with suppliers to develop proprietary
technology for Color Imaging's exclusive use. These strategic relationships have
benefited us in the past, and we intend to continue to pursue such relationships
for new products. Our chemists and consultants are focused on development of
imaging products and manufacturing systems that will increase efficiency, lower
production costs or improve the quality of our products. With certain products,
we may elect to purchase key components from third party suppliers, such as
toner, bottles and or print cartridges. We cannot predict whether we can
continue to develop the technologically advanced products required to remain
competitive or that such products will achieve market acceptance.

INTELLECTUAL PROPERTY

We seek to protect technology, inventions and improvements that we consider
important through the use of trade secrets. While we do not believe that any of
our products infringe any valid claims of patents or other proprietary rights
held by third parties, there can be no assurance that these products do not
infringe any patents or other proprietary rights held by third parties. If an
infringement claim were made, the costs incurred to defend the claim could be
substantial and adversely affect us, even if we were ultimately successful in
defending the claim. If our products were found to infringe any proprietary
right of a third party, we could be required to pay significant damages or
license fees to the third party or cease production. Litigation may also be
necessary to enforce patent rights held by us, or to protect trade secrets or
techniques owned by us. Any such claims or litigation could result in
substantial costs and diversion of effort by management.

Specifically, we believe patent protection is of limited usefulness for our
technologies, because competitors have the ability (even if we had a patent) to
develop substantially equivalent technology. Therefore, we rely on trade secrets
and other unpatented proprietary technology. There can be no assurance that we

can meaningfully protect our rights in such unpatented proprietary technology or
that others will not independently develop substantially equivalent proprietary
products or processes or otherwise gain access to our proprietary technology. We
also seek to protect our trade secrets and proprietary know-how, in part, with
confidentiality agreements with employees and consultants. There can be no
assurance that the agreements will not be breached, that we will have adequate
remedies for any breach or that our trade secrets will not otherwise become
known to or independently developed by competitors.

EMPLOYEES

As of December 31, 2002, we had seventy-seven (77) employees, including one (1)
part-time employee. At December 31, 2001, we had ninety-two (92) employees,
including one (1) part-time employee, while at December 31, 2000, we had one
hundred six (106) employees, including one (1) part-time employee. None of our
employees is represented by a labor union or is covered by a collective
bargaining agreement. We have not experienced any work stoppages and consider
our relations with employees to be good.

ENVIRONMENTAL AND REGULATORY MATTERS

Color Imaging's toner supplies manufacturing operations are subject to laws and
regulations, relating to environmental matters that impose limitations on the
discharge of pollutants into the air, water and soil and establish standards for
the treatment, storage and disposal of solid and hazardous wastes. In this
regard, Color Imaging is required to have a permit in order to conduct various
aspects of its business. The Air Protection Branch of the State of Georgia's
Department of Natural Resources Environmental Protection Division issued a
permit to Color Imaging in 2000 to construct and operate a copier and printer
toner manufacturing facility at our headquarters. The permit is conditioned upon
compliance by us with all the provisions of the Georgia Air Quality Act, and
specifically the Rules, Chapter 391-3-1, in effect. In addition to operating and
maintaining the equipment, in a manner consistent with good air pollution
control practice to minimize emissions, we must maintain records, conduct tests,
and comply with certain allowable emissions and operational limitations. The
permit is subject to revocation, suspension, modification or amendment for
cause, including evidence of our noncompliance. Compliance with these laws and
regulations in the past has not had a material adverse effect on our capital
expenditures, earnings or competitive position. There can be no assurance,
however, that future changes in environmental laws or regulations, or in the
criteria required to obtain or maintain necessary permits, will not have a
material adverse effect on us.

FACILITIES

We currently lease a facility of approximately 180,000 square feet in Norcross,
Georgia from an affiliated party. This facility serves as our executive
headquarters and houses our toner manufacturing facilities, as well as our
research and development and sales and marketing departments. The lease for this
facility expires in March of 2009 and includes three options at our election to
extend the term for five years each. On September 30, 2002, we divested Logical
Imaging Solutions and will no longer have the facility in Santa Ana, California.
Management considers its facility to be sufficient for its current operations.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded on the Over the Counter Bulletin Board (the OTC
Bulletin Board) under the symbol CIMG. Prior to July 7, 2000, the Common Stock
was traded on the OTC Bulletin Board under the symbol ADTX. The following table
sets forth the high and low prices of the Common Stock for the quarters
indicated as quoted on the OTC Bulletin Board.

2000 2001 2002
--------------------------- ------------------------- --------------------------

HIGH LOW HIGH LOW HIGH LOW
----------- ---------- ---------- ---------- ----------- -----------

First Quarter.......... 2.2792 1.2344 3.0000 2.5000 3.3500 2.1000

Second Quarter......... 5.6980 1.3298 2.6500 1.9000 2.5600 1.2500

Third Quarter.......... 6.2500 2.0000 2.7500 1.9000 2.3500 1.0100

Fourth Quarter......... 5.1250 2.0000 4.3000 2.0000 1.6000 0.8000

Through January 22, 2003 of the first quarter of 2003, the high and low prices
of our common stock was $1.55 and $.90. The above quotations represent prices,
adjusted for stock splits, between dealers without adjustments for retail
markups, markdowns or commissions and may not represent actual transactions.

As of September 9, 2002, there were 344 holders of record of our common stock.

We do not anticipate paying cash dividends on our common stock in the
foreseeable future. We currently intend to retain future earnings to finance our
operations and fund the growth of its business. Any payment of future dividends
will be at the discretion of our board of directors and will depend upon, among
other things, our earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of dividends
and other factors that our board of directors deems relevant.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

On June 28, 2000, Color Imaging, Inc., formerly known as Advatex Associates,
Inc. merged with Logical Imaging Solutions, Inc. and Color Image, Inc. and
Logical Imaging Solutions and Color Image became wholly-owned subsidiaries of
Advatex. We previously accounted for the merger as a pooling-of-interests and
has since revised its accounting treatment for the merger to the purchase
method. The financial information contained in this report is in conformity with
the purchase method of accounting, and the historical financial statements are
those of Logical Imaging Solutions. The assets, liabilities and operating
results of Color Image are only included in the consolidated financial
statements of Color Imaging from the date of acquisition, June 28, 2000, or for
only the last six months of the year ended December 31, 2000 and for the full
year ended December 31, 2001. On December 31, 2000, Color Image was merged with
and into Color Imaging. On September 30, 2002, we divested Logical Imaging
Solutions in exchange for 1.7 million shares of our common stock and warrants to
purchase up to 15% of the common stock of Digital Color Print or Logical Imaging
Solutions. As the result of our disposing of Logical Imaging Solutions, Inc. we
no longer offer printing systems to commercial printers nor the support services
and consumables related thereto. As a further result of Color Imaging's
divestiture of Logical Imaging Solutions, our investments in the furthering of
Logical Imaging Solutions' technologies and carrying its operations have ceased.
Significantly, since the merger on June 28, 2000, the Company invested
approximately $2.35 million in the operations of Logical Imaging Solutions and
the development of its technologies with $675,000 of that amount having been
invested during the nine month period ended September 30, 2002. The disposal of
Logical Imaging Solutions eliminates the capital needed to support those
operations and will result in improved profitability from operations. See "Color
Imaging, Inc. - Recent Developments" beginning on page 11 and "Results of
Discontinued Operations" beginning on page 22.

Our operating strategy is to expand, including through strategic acquisition(s),
our printer and copier products business. We intend to expand our printer and
copier business by (1) increasing the capacity of our toner manufacturing
facility and utilize it, increasingly, for higher margin specialty, magnetic
character recognition, digital copier and color toners and (2) by expanding our
sources for products from strategic suppliers that we can add value to or resell
that complement our product lines.

Net sales are primarily generated from the sale of our black text, color and
magnetic character recognition toners. We do not have a written or oral contract
with our customers, and all sales are made through purchase orders. Consistent
with the purchase orders and forecasts provided to us by our major customers, we
provide our major suppliers with purchase orders three months in advance and an
additional rolling forecast for two months. We communicate regularly and meet at
least twice annually with our major customers and suppliers to assess
developments in the industry and changes in the business expected from our
customers to maintain an efficient supply chain. In April 2001, we changed our
purchasing arrangement with our largest supplier to FOB origination from FOB
destination, and we adjusted our pricing to reflect the change to costs.

Net sales, for the three and nine months that ended on September 30, 2002, were
primarily generated from the sale of our black text, color and magnetic ink
character recognition printer and copier toners. Revenue is recognized from the
sale of products when the goods are shipped to the customer. In the nine months
ended September 30, 2002, two distributors of imaging supplies accounted for
approximately 51% and 19%, respectively, of net sales, with the latter being an
OEM for which we private label. For nine months ended September 30, 2001, these
same two customers accounted for 42% and 16%, respectively, of net sales, while
a third customer, whose sales have been made directly to our largest customer
since the second quarter of 2001, accounted for 12% of net sales. Sales to these
customers consist primarily of analog copier products, and as a result are
expected to decline over time unless these declining sales to these customers
are offset by the sale of digital copier products. As of September 30, 2002, we
no longer sell certain very low margin copier products purchased for resale to
our largest customer. As a result, our sales will be less concentrated with our
largest customer and our gross profit margins are expected to improve. Our sales
of this discontinued very low margin product are expected to be approximately $4
million, or 14%, of our total sales this year which represents approximately 30%
of our sales to our largest customer. During the fourth quarter of 2002, as the

result of our largest customer having lost business from one of its major
customers that has been using our product, we expect sales to our largest
customer to further decline by an additional 10% of our total sales this year
which represents approximately 21% of our sales to our largest customer. Sales
to our largest customer during 2003 are expected to be about one-half of the
amount sold to them during 2002, or down approximately $8 million. We do not
have a written or oral contract with this customer. Our inventory for the
discontinued product has been sold, and inventory in connection with the other
products no longer sold by our largest customer to one its customers is still
being sold to our largest customer for sale to others. All sales are made
through purchase orders, and for sales related to copier products we endeavor to
have only small quantities on hand or on order that exceed that required to fill
confirmed purchase orders. Consistent with the purchase orders and forecasts
provided to us by our two major customers that account for 70% of our business,
we provide our major suppliers with purchase orders three months in advance and
an additional rolling forecast for two months. We communicate regularly and meet
at least twice annually with these customers and suppliers to assess
developments in the industry and expected changes in the business to maintain an
efficient supply chain. Net sales made outside of the United States increased to
$8,992,000, or 40% of total sales for the nine months ended September 30, 2002,
compared to $5,224,000, or 23% for the nine months ended September 30, 2001.
This 72% increase in international sales resulted primarily from the increase in
sales to our two largest customers. However, as a result of our no longer
selling the copier products to our largest customer, both our domestic and our
international sales are expected to decrease in the fourth quarter of 2002 and
for all of 2003, while our gross margin is expected to be higher throughout 2003
when compared to 2002.

ACCOUNTING PRINCIPLES

Our financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. We believe the following critical accounting policies affect our more
significant estimates and assumptions used in the preparation of our financial
statements. Our significant estimates and assumptions are reviewed and any
required adjustments are recorded on a quarterly basis.

Allowances for doubtful accounts are maintained based on estimated bad debts. If
the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances might be
required.

Lower of Cost or Market for Inventory. Our inventories are recorded at the lower
of standard cost or market. As with any manufacturer or wholesaler, economic
conditions, cyclical customer demand, product introductions or pricing changes
of our competitors and changes in purchasing or distribution can affect the
carrying value of inventory. As circumstances warrant, we record lower of cost
or market inventory adjustments. In some instances these adjustments can have a
material effect on the financial results of an annual or interim period. In
order to determine such adjustments, we evaluate the age, inventory turns,
estimated fair value and, in the case of toner products, whether or not they can
be reformulated and manufactured into other products, and record any adjustment
if estimated fair value is below cost. Through periodic review of each of our
inventory categories and by offering markdown or closeout pricing, we regularly
take steps to sell off slower moving inventory to eliminate or lessen the effect
of any lower of cost or market adjustment. If assumptions about future demand or
actual market conditions are less favorable than those projected by management,
write-downs of inventory could be required.

Carrying Value of Toner Manufacturing Equipment. We are nearing the completion
of the latest expansion of our toner manufacturing facility. We have
approximately $7.7 million invested in the equipment and leaseholds, with a
carrying value of $6.6 million, in connection with toner manufacturing that have
estimated lives of up to twenty years. Should competing technologies or offshore
competitors cause our manufacturing technology to be non-competitive, the
estimated life of these assets may need to be shortened and their carrying value
could be materially affected.

Revenue from product sales is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. At this time the earnings process is complete and
the risks and rewards of ownership have transferred to the customer, which is
generally when the goods are shipped and all of our significant obligations have
been satisfied.

Cost of goods sold includes direct material and labor, warranty expenses,
license fees and manufacturing and service overhead. Inventories are stated at
the lower of cost (first-in, first-out) or market. Equipment is depreciated
using the straight-line method over the estimated useful lives of the equipment.
Improvements to leased property are amortized over the lesser of the life of the
lease or the life of the improvements.

Selling, general and administrative expenses include marketing and customer
support staff, other marketing expenses, management and administrative personnel
costs, professional services, legal and accounting fees and administrative
operating costs. Selling, general and administrative costs are expensed when the
costs are incurred.

Research and development expenses include costs associated with the development
of new products and significant enhancements of existing products, and consist
primarily of employee salaries, benefits, consulting expenses and depreciation
of laboratory equipment. All research and development costs are expensed as they
are incurred.

RESULTS OF CONTINUING OPERATIONS

The following table sets forth, for the periods indicated for continuing
operations, selected information derived from Color Imaging's twelve month
audited and interim unaudited consolidated statements of operations and
expressed as a percentage of net sales. All periods reflect the operating
results of Color Image from after the date of the merger, June 28, 2000.

Twelve Months Ended Nine Months Ended
December 31, September 30,
--------------------------- -------------------------
2001 2000 2002 2001
----------- ----------- ----------- ---------

Net sales 100 100 100 100
Cost of goods sold 85 87 84 86
Gross Profit 15 13 16 14
Administrative expense 5 7 4 5
Deferred charge write-off 1 0 0 0
Research and development 3 5 3 2
Sales and marketing 4 4 4 4
Operating income 2 -3 4 3
Interest and bond expense 1 2 1 1
Depreciation and amortization 2 3 2 2
Income before taxes 1 -6 2 2
Provision for taxes (credit) 0 -2 1 1

Net income (loss) 1 -3 1 1

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2001

Net Sales. Our net sales decreased by $3 million, or 31%, to $6.7 million for
the three months ended September 30, 2002, from $9.7 million for the three
months ended September 30, 2001. Net sales made in the United States were $3.5
million, a decreased of $4 million, or 54%, from $7.5 million made in the
comparable period in 2001. Net sales made outside of the United States increased
by $1 million, or 45%, for the quarter compared to the same quarter of 2001 The
decrease in net sales for the quarter compared to that of a year ago resulted
from reduced domestic demand for all of our products, while the increase in
sales made outside of the United States was primarily the result of increased
sales to our two largest customers. Of the $6.7 million in net sales, $4.9
million, or 73%, were attributable to our copier products, the same percentage
as that of the comparable period in 2001. The revenue decrease from copier
products from 2001 to 2002 was 32%, while the decrease for the comparable period
experienced by laser products was 30%. Sales of our laser products for the three
months ended September 30, 2002 were $1.8 million compared to $2.6 million for
the same period of 2001. In the three months ended September 30, 2002, two
distributors of imaging supplies accounted for approximately 44% and 22%,
respectively, of net sales, with the latter being an OEM for which we private
label. For nine months ended September 30, 2001, these same two customers
accounted for 50% and 22%, respectively, of net sales. We believe that sales of
both our copier and our laser printing products will decrease in the quarter
ending December 31, 2002, as the result of less domestic demand and the reduced
sales being made to our largest customers.

Cost of Goods Sold. Cost of goods sold decreased by $2.9 million, or 35%, to
$5.5 million from $8.4 million for the three months ended September 30, 2002 and
for the comparable period in 2001, primarily as the result of the decrease in
net sales. Cost of goods sold as a percentage of net sales decreased by 5
percentage points from 87% for the three months ended September 30, 2001 to 82%
for the three months ended September 30, 2002, primarily as the result of
reduced sales derived from certain very loan margin products previously sold to
our largest customer that have been discontinued, a larger percentage of sales
being derived from sales of products with higher gross margins and the effects
of previous price increases on a few analog copier products. Having recently
placed more efficient manufacturing equipment in service, we expect our cost of
goods sold to further decrease as a percentage of net sales.

Gross Profit. As a result of the above factors, gross profit decreased to $1.2
million in the three months ended September 30, 2002 from $1.3 million in the
three months ended September 30, 2001, or only $100,000, while net sales for the
same period decreased by $3 million. Gross profit as a percentage of net sales
increased by 5 percentage points from 13% to 18% for the three months ended
September 30, 2002, as compared to the corresponding period of the prior year.
The increase in the percentage of gross profit resulted primarily from reduced
sales derived from certain very loan margin products previously sold to our
largest customer that have been discontinued, a larger percentage of sales being
derived from sales of products with higher gross margins and the effects of
previous price increases on a few analog copier products. Having recently placed
more efficient manufacturing equipment in service, we expect our gross profit to
further increase as a percentage of net sales.

Operating Expenses. Operating expenses decreased $49,000, or 5%, to $894,000 in
the three months ended September 30, 2002 from $943,000 in the three months
ended September 30, 2001. General and administrative, selling and R&D expenses
increased, as a percentage of net sales, to 14% in the three months ended
September 30, 2002 from 10% in the three months ended September 30, 2001 as the
result of the decrease in net sales for the quarter. General and administrative
expenses decreased approximately 18%, or $68,000 to $304,000 for the three
months ended September 30, 2002 from the comparable period in 2001, largely
resulting from reduced payroll, other taxes, travel and professional investor
relations expenses. Selling expenses decreased by $24,000, or 6%, in the three
months ended September 30, 2002 compared to the three months ended September 30,
2001. Selling expenses decreased primarily as a result of decreased conference
and promotional expenses and fewer bad debts. Research and development expenses
increased by $42,000, or 21%, to $238,000 in the three months ended September
30, 2002, primarily as the result of increased expenditures overall to develop
new black text and color toner digital copier and laser products. We expect to
continue to increase research and development expenditures in an effort to
develop and bring to market more new products before our competition, while also
reformulating certain product formulas to manufacture a greater percentage of
our products on our more efficient production equipment.

Operating Income. As a result of the above factors, primarily the 31% decrease
in net sales, operating income decreased by $51,000, or 15%, to a profit of
$300,000 in the three months ended September 30, 2002 from $351,000 in the three
months ended September 30, 2001.

Interest And Finance Expense. Interest expense decreased by $5,000 in the three
months ended September 30, 2002 from the three months ended September 30, 2001.
The decrease was primarily the result of reduced interest bearing debt levels.

Other Income. Other income increased by $24,000 from income of $15,000 to a cost
of $9,000 in the three months ended September 30, 2002 from the three months
ended September 30, 2001, primarily as the result of Euro exchange losses.

Income Taxes. As the result of our profit from continuing operations in the
three months ended September 30, 2002, we recorded an income tax provision of
$89,000 for the period, while the income tax provisions were $94,000 for the
three months ended September 30, 2001.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2001

Net Sales. Our net sales decreased by $0.8 million, or 3%, to $22.3 million for
the nine months ended September 30, 2002, from $23.1 million for the nine months
ended September 30, 2001. Net sales made in the United States were $13.3
million, a decrease of $4.5 million, or 25%, from $17.8 million made in the
comparable period in 2001. Net sales made outside of the United States increased
by $3.7 million, or 70%, to $9.0 million for the nine months ended September 30,
2002 compared to same nine months of 2001. The decrease in net sales for the
nine months ended September 30, 2002, compared to that of a year ago resulted
from reduced domestic demand for all of our products, while the increase in
sales made outside of the United States was primarily the result of increased
sales to our two largest customers. Of the $22.3 million in net sales, $15.8
million, or 71%, were attributable to our copier products. Of the $23.1 million
in net sales for the nine months ended September 30, 2001, 69% were derived from
copier products. The revenue decrease from copier and laser products from 2001
to 2002 was 1% and 10%, respectively. The greater decrease in laser products
results primarily from reduced demand in the United States, where most of these
products are sold. In the nine months ended September 30, 2002, two distributors
of imaging supplies accounted for approximately 51% and 19%, respectively, of
net sales, with the latter being an OEM for which we private label. For nine
months ended September 30, 2001, these same two customers accounted for 42% and
16%, respectively, of net sales, while a third customer, whose sales have been
made directly to our largest customer since the second quarter of 2001, account
for 12% of net sales. We believe that sales of both our copier and our laser
printing products will decrease in the quarter ending December 31, 2002, as the
result of less domestic demand and the reduced sales being made to our largest
customer.

Cost of Goods Sold. Cost of goods sold decreased by $1 million, or 5%, to $18.8
million from $19.8 million for the nine months ended September 30, 2002 and for
the comparable period in 2001. Cost of goods sold as a percentage of net sales
decreased by 2 percentage points from 86% for the nine months ended September
30, 2001 to 84% for the nine months ended September 30, 2002, primarily as the
result of reduced sales derived from certain very low margin products previously
sold to our largest customer that have been discontinued, a larger percentage of
sales being derived from sales of products with higher gross margins and the
effects of previous price increases on a few analog copier products. Having
recently placed more efficient manufacturing equipment in service, we expect our
cost of goods sold to further decrease as a percentage of net sales.

Gross Profit. As a result of the above factors, gross profit increased to $3.5
million in the nine months ended September 30, 2002 from $3.3 million in the
nine months ended September 30, 2001, or $200,000 and 7%, while net sales for

the same period decreased by $800,000, or 3%. Gross profit as a percentage of
net sales increased by 2 percentage points from 14% to 16% for the nine months
ended September 30, 2002, as compared to the corresponding period of the prior
year. The increase in the percentage of gross profit resulted primarily from
reduced sales derived from certain very loan margin products previously sold to
our largest customer that have been discontinued, a larger percentage of sales
being derived from sales of products with higher gross margins and the effects
of previous price increases on a few analog copier products. Having recently
placed more efficient manufacturing equipment in service, we expect our gross
profit to further increase as a percentage of net sales.

Operating Expenses. Operating expenses increased approximately $90,000 or 4% to
$2.65 million in the nine months ended September 30, 2002 from $2.56 million in
the nine months ended September 30, 2001. As a percentage of net sales general
and administrative, selling and R&D expenses, was 11% for the nine months ended
September 30, 2002 and 2001. The increase in operating expenses as a percentage
of net sales was largely the result of the decrease in net sales for the nine
months ended September 30, 2002. General and administrative expenses decreased
approximately 11%, or $125,000 to $1,000,000 for the nine months ended September
30, 2002 from the comparable period in 2001, largely resulting from decreased
payroll and consulting expenses. Selling expenses increased by $81,000, or 10%,
in the nine months ended September 30, 2002 compared to the nine months ended
September 30, 2001. Selling expenses increased primarily as the result of
increased commissions and advertising expenses. Research and development
expenses increased by $137,000, or 25%, to $689,000 in the nine months ended
September 30, 2002, primarily as the result of increased expenditures overall to
develop new black text and color toner digital copier and laser products. We
expect to continue to increase research and development expenditures in an
effort to develop and bring to market more new products before our competition,
while also reformulating certain product formulas to manufacture a greater
percentage of our products on our more efficient production equipment.

Operating Income. As a result of the above factors, operating income increased
by $139,000, to a profit of $858,000 in the nine months ended September 30, 2002
from $718,000 in the nine months ended September 30, 2001.

Interest And Finance Expense. Interest expense decreased by $60,000 in the nine
months ended September 30, 2002 from the nine months ended September 30, 2001.
The decrease was primarily the result of reduced interest bearing debt levels.

Other Income. Other income decreased by $6,000 from income of $26,000 to income
of $20,000 in the nine months ended September 30, 2002 from the nine months
ended September 30, 2001.

Income Taxes. As the result of our increased profit from continuing operations
for the nine months ended September 30, 2002, our provision for taxes increased
from $142,000 in the nine months ended September 30, 2001 to $251,000 for the
period ended September 30, 2002.

RESULTS OF DISCONTINUED OPERATIONS

On September 30, 2002, we completed a share exchange agreement with Digital
Color Print, Inc., whereby we received 1.7 million shares of our common stock in
exchange for all of the shares of the common stock of our subsidiary, Logical
Imaging Solutions, Inc. The financial statements for the quarter ending
September 30, 2002, herein, reflect the divestiture of Logical Imaging
Solutions, Inc. Pro forma financial statements, balance sheet and statement of
operations, eliminating the discontinued operations of Logical Imaging
Solutions, Inc., derived from the audited financial statements for the fiscal
years ended December 31, 2001 and December 31, 2000 are set forth later herein:

The following table sets forth, for the periods indicated, selected information
relating to the discontinued operations of Logical Imaging Solutions that has
been derived from our audited and unaudited consolidated statements of
operations.

TWELVE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- --------------------------
2000 2001 2002
--------------------------- -------------------------- --------------------------

Net revenue $ 723,063 $ 551,399 $ 464,628
Operating (loss) (350,999) (267,220) (406,570)
Net (loss) $ (271,799) $ (204,154) $ (261,326)
=========================== ========================== ==========================

COLOR IMAGING, INC.
PRO FORMA CONDENSED BALANCE SHEETS
DECEMBER 31, 2001
(Unaudited)

CONSOLIDATED, PRO FORMA
AS PREVIOUSLY DISCONTINUED CONTINUING
REPORTED OPERATIONS OPERATIONS
------------- ------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 395,327 $ 1,346 $ 393,981
Accounts receivable, net 3,030,995 136,992 2,894,003
Inventory 6,056,042 451,067 5,604,975
Deferred income taxes 277,239 86,730 190,509
Related party portion of IDR bond 79,596 -- 79,596
Other current assets 339,141 3,520 335,621
------------ ------------ ------------
TOTAL CURRENT ASSETS 10,178,340 679,655 9,498,685
------------ ------------ ------------

PROPERTY, PLANT AND EQUIPMENT - NET 8,438,826 1,425,756 7,013,070
------------ ------------ ------------
OTHER ASSETS
Patent/intellectual property 5,000 5,000 --
Deferred income taxes 312,000 312,000 --
Related party portion of IDR bond 818,500 -- 818,500
Other assets 225,204 3,073 222,131
------------ ------------ ------------
TOTAL OTHER ASSETS 1,360,704 320,073 1,040,631
------------ ------------ ------------
TOTAL ASSETS $ 19,977,870 $ 2,425,484 $ 17,552,386
============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Revolving credit lines $ 1,462,416 $ -- $ 1,462,416
Accounts payable 4,898,665 57,251 4,841,414
Current portion of notes payable 369,198 63,966 340,232
Current portion of bonds payable 335,000 -- 335,000
Other current liabilities 501,086 34,043 432,043
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 7,566,365 155,260 7,411,105
------------ ------------ ------------
LONG TERM LIABILITIES
Notes payable 1,359,000 6,107 1,352,893
Bonds payable 3,445,000 -- 3,445,000
------------ ------------ ------------
LONG TERM LIABILITIES 4,804,000 6,107 4,797,893
------------ ------------ ------------
TOTAL LIABILITIES 12,370,365 161,367 12,208,998
------------ ------------ ------------
COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 20,000,000
shares; 10,099,175 and 8,399,175 shares issued and
outstanding on December 31, 2001 and pro forma on
December 31, 2001, respectively 100,992 17,000 83,992
Additional paid-in capital 9,873,939 4,332,888 7,626,822
Stock subscription receivable (149,000) -- (149,000)
Accumulated deficit (2,218,426) (2,085,771) (2,218,426)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,607,505 2,264,117 5,343,388
------------ ------------ ------------
$ 19,977,870 $ 2,425,484 $ 17,552,386
============ ============ ============

COLOR IMAGING, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001
(Unaudited)

CONSOLIDATED, PRO FORMA
AS PREVIOUSLY DISCONTINUED CONTINUING
REPORTED OPERATIONS OPERATIONS
------------- ------------ ------------

SALES $30,521,167 $ 551,399 $29,969,768

C0ST OF SALES 26,053,501 455,406 25,598,095
------------- ------------ ------------
GROSS PROFIT 4,467,666 95,993 4,371,673
------------- ------------ ------------
OPERATING EXPENSES

Administrative 1,708,406 243,723 1,464,683

Deferred charge write-off 215,371 -- 215,371

Research & development 883,115 91,617 791,498

Sales & marketing 1,196,458 27,873 1,168,585
------------- ------------ ------------
4,003,350 363,213 3,640,137
------------- ------------ ------------

INCOME (LOSS) FROM OPERATIONS 464,316 (267,220) 731,536
------------- ------------ ------------

OTHER INCOME (EXPENSE)

Interest and other (expense) 39,183 (599) 39,782

Financing expenses (417,107) (21,509) (395,598)

------------- ------------ ------------
(377,924) (22,108) (355,816)
------------- ------------ ------------

INCOME (LOSS) BEFORE TAXES 86,392 (289,328) 375,720

PROVISION (CREDIT) FOR INCOME TAXES 36,616 (85,174) 121,790
------------- ------------ ------------

NET INCOME (LOSS) $ 49,776 $ (204,154) $ 253,930
============= ============ ============

INCOME PER COMMON SHARE
Basic $ .01 $ .04
Diluted $ .01 $ .04

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 7,985,071 6,285,071
Assumed conversion 575,298 575,298
------------ ------------
8,560,369 6,860,369
------------ ------------

COLOR IMAGING, INC.
PRO FORMA CONDENSED BALANCE SHEETS
DECEMBER 31, 2000
(Unaudited)

CONSOLIDATED, PRO FORMA
AS PREVIOUSLY DISCONTINUED CONTINUING
REPORTED OPERATIONS OPERATIONS
------------- ------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 339,348 $ 885 $ 338,463
Accounts receivable, net 3,562,120 118,219 3,443,901
Inventory 5,181,248 438,360 4,742,888
Deferred income taxes 155,526 -- 155,526
Related party portion of IDR bond 76,032 -- 76,032
Other current assets 401,143 418 400,725
------------ ------------ ------------
TOTAL CURRENT ASSETS 9,715,417 557,882 9,157,535
------------ ------------ ------------

PROPERTY, PLANT AND EQUIPMENT - NET 8,256,430 928,259 7,328,171
------------ ------------ ------------
OTHER ASSETS
Patent/intellectual property 5,000 5,000 --
Deferred income taxes 467,984 312,000 155,984
Related party portion of IDR bond 898,096 -- 898,096
Other assets 269,626 7,566 262,060
------------ ------------ ------------
TOTAL OTHER ASSETS 1,640,706 324,566 1,316,140
------------ ------------ ------------
TOTAL ASSETS $ 19,612,553 $ 1,810,707 $ 17,801,846
============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Revolving credit lines $ 1,399,000 $ -- $ 1,399,000
Accounts payable 6,665,322 199,636 6,465,686
Current portion of notes payable 349,408 44,285 305,123
Current portion of bonds payable 320,000 -- 320,000
Other current liabilities 364,765 41,097 323,668
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 9,098,495 285,018 8,813,477
------------ ------------ ------------
LONG TERM LIABILITIES
Notes payable 1,698,058 32,266 1,665,792
Bonds payable 3,780,000 -- 3,780,000
------------ ------------ ------------
LONG TERM LIABILITIES 5,478,058 32,266 5,445,792
------------ ------------ ------------
TOTAL LIABILITIES 14,576,553 317,284 14,259,269
------------ ------------ ------------
COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 20,000,000
shares; 7,490,848 and 5,790,848 shares issued and
outstanding on December 31, 2000 and pro forma on
December 31, 2000, respectively 74,909 17,000 57,909
Additional paid-in capital 7,229,293 3,358,040 5,752,870
Accumulated deficit (2,268,202) (1,881,617) (2,268,202)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 5,036,000 1,493,423 3,542,577
------------ ------------ ------------
$ 19,612,553 $ 1,810,707 $ 17,801,846
============ ============ ============

COLOR IMAGING, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2000
(Unaudited)

CONSOLIDATED, PRO FORMA
AS PREVIOUSLY DISCONTINUED CONTINUING
REPORTED OPERATIONS OPERATIONS
------------- ------------ ------------

SALES $12,108,132 $ 723,063 $11,385,069

C0ST OF SALES 10,329,418 447,329 9,882,089
------------ ------------ ------------
GROSS PROFIT 1,778,714 275,734 1,502,980
------------ ------------ ------------
OPERATING EXPENSES

Administrative 1,145,954 372,210 773,744

Research & development 764,286 213,259 551,027

Sales & marketing 470,625 -- 470,625
------------ ------------ ------------
2,380,865 585,469 1,795,396
------------ ------------ ------------

LOSS FROM OPERATIONS (602,151) (309,735) (292,416)
------------ ------------ ------------

OTHER INCOME (EXPENSE)

Interest and other income (expense) (7,147) (21,531) 14,384

Financing expenses (241,037) (19,733) (221,304)

Loss on disposal of fixed assets (140,841) -- (140,841)

------------ ------------ ------------
(389,025) (41,264) (347,761)
------------ ------------ ------------

(LOSS) BEFORE TAXES (991,176) (350,999) (640,177)

PROVISION (CREDIT) FOR INCOME TAXES (332,792) (79,200) (253,592)
------------ ------------ ------------

NET (LOSS) $ (658,384) $ (271,799) $ (386,585)
============ ============ ============

(LOSS) PER COMMON SHARE
Basic and diluted $ (.09) $ (.07)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted 7,064,042 5,364,042

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net Sales. Our net sales were $30.0 million for the year ended December 31,
2001, or an increase of 175% compared to $11.1 million for the year ended
December 31, 2000. Of the $30.5 million in net sales, $30.0 million were
attributable to laser printer and copier products of Color Imaging. The revenue
increase from copier products from $7.3 million to $20.7 million from 2000 to
2001 was $13.4 million, or 184%. Had the entire year of Color Image's operations
been included in the year 2000, the copier product sales for 2000 would have
been $12.1 million and the increase only $8.6 million or 71%.

Cost of Goods Sold. Cost of goods sold increased by $15.7 million or 159% to
$25.6 million in the year ended December 31, 2001 from $9.9 million in the year
ended December 31, 2000. Had Color Image's entire year 2000 been included, cost
of goods sold would have increased by $8.1 million or 45%. This increase was
primarily due to increased net sales. Cost of goods sold as a percentage of net
sales remained at 85% in the year ended December 31, 2001.

Gross Profit. As a result of the above factors, gross profit increased to $4.4
million in the year ended December 31, 2001 from $1.5 million in the year ended
December 31, 2000. Gross profit as a percentage of net sales, however, was 15%
and 13% for December 31, 2001 and 2000 respectively. During 2002, with the
completion of the factory expansion, management believes that both the gross
profit dollars and percentage will improve over that achieved in 2001.

Operating Expenses. Operating expenses increased $1,845,000 or 103% to
$3,640,000 in the year ended December 31, 2001 from $1,795,000 in the year ended
December 31, 2000. Had the entire year of Color Image's been included in the
year 2000, these expenses would have increased approximately 36%.
Notwithstanding the deferred charge write-off, general and administrative,
selling and R&D expenses decreased, as a percentage of net sales, to 12% in the
year 2001 from 16% in the year ended December 31, 2000. General and
administrative expenses increased by $691,000, or 89%, primarily as the result
of only reflecting Color Image's expenses for the last half of the year 2000.
Had Color Image's expenses been included for the entire year 2000, the increase
would have been 47%, and that increase was largely due to increased professional
fees and payroll as the result of the expanded operations of Color Imaging.
Selling expenses increased by $698,000, or 148%, in the year ended December 31,
2001 compared to the year ended December 31, 2000. Had Color Image's selling
expenses been included for the entire year 2000, the increase would have been
$288,000, or 38%, in the year ended December 31, 2001 compared to the year ended
December 31, 2000. Selling expenses increased primarily as the result of the
increased marketing costs associated with the increased revenues from copier
products. Research and development expenses increased by $240,000, or 44%, to
$791,000 in the year ended December 31, 2001. Research and development expenses
as a percentage of net sales decreased to 3% in the year 2001, from 5% in the
year 2000, reflecting the higher sales level. Research and development expenses,
particularly in connection with toner formulation and manufacturing process
development, are expected to increase further during 2002.

Deferred Charge Write-Off. An expense of $215,000 was recorded in the year ended
December 31, 2001, for expenditures related to activities in connection with an
acquisition of a manufacturing business that was not consummated. $53,000 of
this expense was incurred during the year ended December 31, 2000 and $162,000
during the year ended December 31, 2001.

Operating Income. As a result of the above factors the operating income
increased by $1,024,000, to a profit of $732,000 in the year ended December 31,
2001 from a loss of $292,000 in the year ended December 31, 2000. $256,000 of
the year ended December 31, 2000 operating loss resulted from expenses in
connection with our factory relocation.

Interest and Finance Expense. Interest expense increased by $175,000 in the year
ended December 31, 2001 from the year ended December 31, 2000. Had Color Image's
interest expense for the entire year 2000 been included in interest and finance
expenses, these expenses would have actually decreased $74,000 in the year ended
December 31, 2001 from $469,000 in the year ended December 31, 2000. The
decrease on a full year basis was primarily the result of lower interest rates
and secondarily the result of reduced interest bearing debt levels.

Other Income. Other income increased by $166,000 from expenses of $126,000 to
income of $40,000 in the year ended December 31, 2001 from the year ended
December 31, 2000. This increase was primarily due to not having the expenses in
2001 for the disposal of equipment in connection with our factory relocation
during 2000.

Income Taxes. As the result of our increased profit in the current year, income
tax provisions were $122,000 for the year ended December 31, 2001 compared to a
tax credit of $254,000 for the year ended December 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

Excluding the net assets of our discontinued operations, at September 30, 2002,
and December 31, 2001, our working capital and current ratio was approximately
$2.2 million and $2.1 million and 1.28 to 1 and 1.28 to 1, respectively.

Cash flows provided by continuing operating activities were $737,000 in the nine
months ended September 30, 2002 compared to $361,000 provided by continuing
operations in the nine months ended September 30, 2001. The cash flows used by
continuing operating activities in the nine months ended September 30, 2002
increased primarily due to higher net income and the reduction made to
inventories. We continue to reduce SKUs, and we expect to further reduce SKUs
and inventories further during 2003.

Cash flows used in investing activities were $527,000 in the nine months ended
September 30, 2002, compared to $314,000 in the nine months ended September 30,
2001. The increase in cash used in investing activities in the nine months ended
September 30, 2002, was entirely attributable to increase capital expenditures
in connection with our most recent factory expansion.

We have a $2.5 million revolving line of credit with our bank that had an
outstanding balance as of September 30, 2002 of $1,092,000. At the end of each
month, for the following month, we have an interest rate option of either the
one-month Libor interest rate in effect two business days before the first day
of the month plus 2.50% or our bank's prime interest rate minus 0.25%. As of
September 30, 2002, the interest rate was the one-month Libor rate of 1.84% plus
2.50% (4.34%). This revolving line of credit has a June 30, 2003 expiration
date. Under the line of credit, we are permitted to borrow up to 85% of eligible
accounts receivable and 50 percent of eligible inventories (up to a maximum of
$1.1 million of such inventories and not to exceed 60 percent of the total
outstanding). We have granted our bank a security interest in all of our assets
as security for the repayment of the lines of credit.

The Bank agreement contains various covenants which the Company is required to
maintain, and as of September 30, 2002, the Company was in compliance with these
covenant requirements.

Cash flows provided by financing activities for the nine months ended September
30, 2002 was $186,000, resulting primarily from the $1,000,000 in loans we
received from three directors, compared to $451,000 provided by financing
activities for the comparable period of 2001. The cash flows provided by
financing activities for the nine months ended September 30, 2001 were derived
primarily from proceeds from the sale of our common stock.

Funds generated from operating activities and availability under credit
facilities is expected to be sufficient to fund our operations and other
obligations, but insufficient to finance certain of our planned investing and
financing plans for 2003. We anticipate that we will need to raise an additional
$2 million from other sources to payoff $1.4 million of institutional debt and
to acquire $600,000 of production and research and development equipment. To
meet the $2 million in planned financing and investing requirements we intend to
engage in sales of our securities and or obtaining institutional financing.
Should we not obtain these additional funds, these financing and investing
activities would have to be reduced or curtailed entirely to meet our existing
commitments. There can be no assurance that proceeds from the sale of our
securities or institutional borrowings will be available to meet these planned
financing and investing activities. We believe that these planned investing and
financing activities, if successfully completed, will increase revenues and
operating margins and reduce interest expense.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Our directors and executive officers are as specified on the following table.
Effective on September 30, 2002, the divestiture date of Logical Imaging
Solutions, directors Edwin C. St. Amour, Robert L. Langsam and Victor A.
Hollander resigned from our board. Michael W. Brennan resigned from our board on
June 10, 2002, effective September 10, 2002, and as of September 30, 2002 is no
longer an employee.

NAME AGE POSITION
------------------------------- ---------- --------------------------------------------------
Jui-Hung Wang 56 Director and Chairman of the Board
Sueling Wang, PhD 49 President and Vice Chairman
Morris E. Van Asperen 59 Executive Vice President, Chief Financial Officer,
Secretary and Director
Charles R. Allison 70 Vice President, Marketing and Sales, and Director
Jui-Chi Jerry Wang 46 Director
Jui-Kung Wang 59 Director

Jui-Hung (Jack) Wang, Chairman since June 2002, has served as a director of
Color Imaging since June 2001. He was a founder and director of Color Image,
Inc. until its merger with Color Imaging. He is a founder and serves as Chairman
of General Plastic Industrial Co., Ltd, a leading Taiwan based manufacturer of
after market injection molded cartridges and accessories for copiers and laser
printers. Since January 2001, Mr. Wang has served as a director of Taiwan Yu-Tzu
Company, a food company. In 1998, Mr. Wang was a founding member of Kings
Brothers LLC, which leases space to Color Imaging used for our headquarters and
manufacturing facilities in Norcross, Georgia. From 1986 to 1994, Mr. Wang was
mayor of Wu-Chi Town, Taiwan.

Sueling Wang, PhD., became President and Vice-Chairman of Color Imaging in June
2000. From 1989 to 2000, he served as President and director of Color Image,
Inc. which was merged with Color Imaging. Dr. Wang was also a founder of Color
Image Inc. In 1998, Dr. Wang was a founding member of Kings Brothers LLC, which
leases space to Color Imaging used for our headquarters and manufacturing
facilities in Norcross, Georgia. Dr. Wang received a M.S. degree from the
University of Windsor, in Ontario, Canada and a PhD degree from the University
of Detroit. Dr. Wang's expertise in resin synthesis brought him into the toner
industry and led to the formation of Color Image, Inc. in 1989.

Morris E. Van Asperen has served as Executive Vice President, Chief Financial
Officer and director of Color Imaging since June 2000 and Secretary since June
2001. Since 1998, he has served as director of Logical Imaging Solutions. From
1986 to 2000, he was employed by National Bank of California in various
positions most recently as Executive Vice President and Credit Administrator.
Mr. Van Asperen also has extensive experience as a financial and management
consultant to businesses of up to $50 million in revenues and 1,000 employees in
construction, household goods, industrial glass, and electronics manufacturing
and software development. From 1977 to 1984, he served as Vice President & Chief
Financial Officer of ATE Associates, Inc., a supplier of test fixtures and
software for numerous military aircraft programs. Mr. Van Asperen received a
B.S. degree in Mathematics from the University of Oklahoma and an M.B.A. degree
from Pepperdine University.

Charles R. Allison, a director since June 2000, was made Vice President,
Marketing and Sales in December 2002. Prior to that he served as Vice President,
Technology of Color Imaging since July 2002. From 1992 to 2000, he served as
Vice President of Marketing and Sales of Color Image, Inc., which was merged
with and into Color Imaging. From 1982 to 1991, he served as Vice President of
Sales and Marketing, and general manager, at Synfax Manufacturing, Inc., an
early developer of consumable products for EBI-based printing technologies. Mr.
Allison has held other senior positions in the printing/imaging industry,
including positions with Minolta Corporation, Litton Business Systems and Royal
McBee.

Jui-Chi (Jerry) Wang has served as a director of Color Imaging since June 2000.
From 1994 until 2000, he served as a director of Color Image, Inc., which was
merged with Color Imaging. Since 1984, Mr. Wang has served as President of
General Plastic Industrial Co. Ltd (GPI), a Taiwan-based plastics manufacturer
specializing in injection moldings and more particularly toner cartridges and
accessories for copiers and laser printers. In 1998, Mr. Wang was a founding
member of Kings Brothers LLC, which leases space to Color Imaging used for our
headquarters and manufacturing facilities in Norcross, Georgia. Mr. Wang
received a Master's Degree in Computer Engineering from the University of
Southern California.

Jui-Kung (Elmer) Wang has served as a director of Color Imaging since September
2001. He was a founder of Color Image, Inc. in 1989 and its Chairman until its
merger with Color Imaging. He is a co-founder and has served as a director of
General Plastic Industrial Co., Ltd, a leading Taiwan based manufacturer of
after market injection molded cartridges and accessories for copiers and laser
printers since 1978. In 1998 Mr. Wang was a founding member of Kings Brothers
LLC, which leases space to Color Imaging we use for our headquarters and
manufacturing facilities in Norcross, Georgia. Mr. Wang has been a professor of
management with Tung-Hai University, Taiwan for over 20 years. He has received a
bachelor's degree in economics, and MBA and PhD degrees in management.

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the compensation earned by
our chief executive officer and the three other most highly compensated
executive officers who were serving as such as of December 31, 2002, 2001 and
2000 (collectively, the Named Executive Officers), whose aggregate compensation
for fiscal years 2002, 2001 and 2000 exceeded $100,000 for services rendered in
all capacities to Color Imaging and its subsidiaries for that fiscal year.

SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------
ANNUAL LONG-TERM COMPENSATION
COMPENSATION -----------------------------------------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(#) COMPENSATION ($)(1)
-------------------------------- -------- -------------------- ------------------------- -------------------------
Dr. Sueling Wang 2002 $158,439 -- $ 38,736 (2)
President and 2001 $158,423 100,000 (6) $ 22,313 (2)
Chief Executive Officer (10) 2000 $149,159 200,000 (7) $ 18,887 (2)

Michael W. Brennan (11) 2002 $157,500 -- 6,889
2001 $151,442 150,000 (6) $ 6,403
2000 $146,485 -- $ 25,591 (3)

Morris E. Van Asperen 2002 $151,200 -- 14,353 (4)
Executive Vice President 2001 $146,714 100,000 (6) $ 5,461
Chief Financial Officer & 2000 $ 54,294 200,000 (8) $ --
Secretary

Charles R. Allison 2002 $103,028 -- $ 27,321 (5)
Vice President 2001 $106,379 50,000 (6) $ 28,145 (5)
Marketing & Sales 2000 $101,996 50,000 (9) $ 25,902 (5)

(1) For named executive officers the amount reported represents the cost of
group insurance benefits, Color Imaging's matching contribution to the
401(k) plan for the officer and other life insurance policies maintained
for him, as further described in the notes for each officer, respectively.
(2) The split dollar life insurance premiums were $22,773, $13,526 and $8,253
during 2002, 2001 and 2000, respectively. Pursuant to the policies Color
Imaging will, upon his death or earlier liquidation of each such policy, be
entitled to the refund of all premium payments made by Color Imaging on the
policies, and the balance of the proceeds will be paid to Mr. Wang's
designated beneficiaries.
(3) The split dollar life insurance policy is no longer in force. Premiums paid
during 2000 were $15,584.
(4) The life insurance premiums reimbursed by Color Imaging in 2002, 2001 and
2000 was $6,446, $0 and $0, respectively.
(5) The life insurance premiums paid by Color Imaging in 2002, 2001 and 2000
were $20,882, $21,977 and $22,476, respectively. Color Imaging owns and is
the beneficiary of this policy and maintains it to fund the deferred
compensation agreement with Mr. Allison. Upon Mr. Allison's retirement, he,
or his beneficiaries, are to receive 120 monthly payments of $2,500 per
month or, as provided, the net present value of any unpaid amounts.
(6) Options granted by action of the board of directors on March 21, 2001. 25%
vest upon grant and the balance vest 25% per year upon each anniversary of
the date of grant. The options expire five years after their respective
vesting date(s). As the result of Mr. Brennan's termination effective
September 30, 2002, with the divestiture of Logical Imaging Solutions by
Color Imagng, Mr. Brennan's options lapsed without exercise on December 31,
2002.
(7) The options were granted as part of the officer's employment agreement on
June 28, 2000. 100,000 vested immediately and the remainder vested ratably
over the next two years upon the anniversary date of the grant.
(8) The options were granted as part of the officer's employment agreement on
June 28, 2000. 100,000 vested immediately and the remainder vested ratably
over the next four years upon the anniversary date of the grant. Mr. Van
Asperen joined Color Imaging as Executive Vice President in August 2001.
(9) The options were granted as part of the officer's employment agreement on
June 28, 2000. 25,000 vested immediately and the remainder vested ratably
over the next two years upon the anniversary date of the grant.
(10) As a result of Mr. Brennan's resignation, Dr. Wang is the principal
executive officer of Color Imaging, and continues to serve as President and
Vice Chairman of the Color Imaging, Inc. See "Color Imaging, Inc. - Recent
Developments" beginning on page 11.
(11) On June 10, 2002, Mr. Brennan was replaced as Chairman and Chief Executive
Officer of Color Imaging, Inc., and as of September 30, 2002, he is no
longer an employee. See "Color Imaging, Inc. - Recent Developments"
beginning on page 11.

OPTION GRANTS TABLE

No options were granted to the Named Executive Officers during the year ended
December 31, 2002.

OPTION EXERCISES AND YEAR-END VALUE TABLE

None of the Named Executive Officers exercised stock options during 2002. The
following table sets forth certain information regarding unexercised options
held at year-end by each of the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN 2002 AND OPTION VALUES AT DECEMBER 31, 2002

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS
------------------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
------------------------- ---------------- --------------- ------------------ -------------------
Sueling Wang 0 0 250,000 50,000

Michael W. Brennan (1) 0 0 0 0

Morris E. Van Asperen 0 0 200,000 100,000

Charles R. Allison 0 0 75,000 25,000

--------------------
(1) Mr. Brennan's options lapsed, without having been exercised, on December
31, 2002, as the result of the termination of his employment with Color
Imaging on September 30, 2002.

Based on the closing price of our common stock of $1.20 on December 31, 2002, no
unexercised options were in the money for the Named Executive Officers.

EMPLOYMENT AGREEMENTS

On June 28, 2000, we entered into employment agreements with Michael W. Brennan,
Dr. Sueling Wang, Morris E. Van Asperen, and Charles R. Allison. Each of these
employment agreements has a 5 year term. We are obligated to pay Mr. Brennan and
Dr. Wang annual salaries of $150,000 each with a guaranteed increase of 5% per
annum over the term of the agreements. We are obligated to pay Mr. Van Asperen
an annual salary of $144,000 with a guaranteed increase of 5% per annum over the
term of his agreement. In addition to commissions earned under our sales
incentive program, we are obligated to pay Mr. Allison an annual salary of
$89,250 with a guaranteed increase of 5% per annum over the term of his
agreement. Each employee may terminate the agreement upon 6 months notice to us.
We may terminate each employee upon 6 months notice, provided, however, that we
are obligated to pay to the employee his annual base salary, commissions or
bonuses earned, and benefits for a period of 12 months after the date of such
notice. On June 10, 2002, the term of Mr. Brennan's agreement was amended to
expire on June 10, 2003 and his compensation and benefits were fixed at their
current levels. As of September 30, 2002, the effective date of our divestiture
of Logical Imaging Solutions, Mr. Brennan is no longer an employee, and Mr.
Brennan's severance formerly payable through June 10, 2003 will be terminated as
of March 10, 2003. Effective December 30, 2002, Mr. Allison's employment
agreement was cancelled, he was made vice president, marketing and sales, his
base salary was reduced to $45,500, he is to be paid commissions on most of the
sales of Color Imagng and his retirement date per his salary continuation and
deferred compensation agreement was extended from February 1, 2003 to December
31, 2003.

The employment agreements with the above named officers also commit us to
purchasing for their benefit certain life insurance plans. For the year ended
December 31, 2002 and 2001, we did not have in place for Mr. Brennan such
supplemental life insurance plan, while Mr. Van Asperen's plan was initiated
during 2002. Mr. Van Asperen was paid $6,446 to reimburse him for the life
insurance premiums he paid in connection with the policy. We are the owners of
as well as the beneficiary of a life insurance policy on Mr. Allison and we
maintain it to fund the deferred compensation agreement with Mr. Allison. Upon
Mr. Allison's retirement, he, or his beneficiaries, are to receive 120 monthly
payments of $ $2,500 per month or, as provided, the net present value of any
unpaid amounts. In the event that the ownership of the life insurance policy on
Mr. Allison's life is transferred to Mr. Allison, Color Imagng is discharged
from any and all obligations to make any payments under the salary continuation
and deferred compensation agreement with Mr. Allison. The life insurance
premiums paid by us to fund Mr. Allison's deferred compensation agreement in
2002, 2001 and 2000 were $20,882, $21,977 and $11,238, respectively. We pay the
premiums and we are the collateral assignee of four split dollar life insurance
policies owned by Dr. Wang. Pursuant to the policies we will, upon his death or
earlier liquidation of each such policy, be entitled to the refund of all
premium payments made by us on the policies, and the balance of the proceeds
will be paid to Dr. Wang's designated beneficiaries. The split dollar life
insurance premiums were $22,773, $13,526 and $8,253 during 2002, 2001 and 2000,
respectively. The monies due from Dr. Wang in connection with these life
insurance policies at the years ended December 31, 2002, 2001 and 2000 was
$134,877, $112,103 and $98,578, respectively.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to Color Imaging with respect
to the beneficial ownership of Color Imaging's common stock as of January 17,
2003 by:

o each stockholder known by Color Imaging to own beneficially more than
5% of Color Imaging's common stock;

o each Named Executive Officer;

o each of Color Imaging's directors; and

o all directors and executive officers as a group.

Except as otherwise indicated in the footnotes, Color Imaging believes that the
beneficial owners of the common stock listed below, have sole voting power and
investment power with respect to such shares of common stock indicated. In
computing the number of shares beneficially owned by a person and the percent
ownership of that person, shares of common stock subject to options or warrants
held by that person that are currently exercisable or will become exercisable
within 60 days of the date of this prospectus are deemed outstanding, while such
shares are not deemed outstanding for purposes of computing percent ownership of
any other person.

PERCENTAGE OF
NAME OF BENEFICIAL OWNER NO. OF SHARES OWNERSHIP(1)
---------------------------------- ------------------- --------------------
Sueling Wang (2) 1,956,551 22.5%
Morris E. Van Asperen (3) 310,906 3.6%
Charles R. Allison (4) 75,000 *
Jui-Chi Wang (5) 689,450 8.2%
Jui-Hung Wang (6) 704,178 8.3%
Jui-Kung Wang (7) 321,209 3.8%
Joseph P. Donnolo 472,443 5 6%
Che-Chang Yeh 445,205 5 3%
Michael W. Brennan (8) 275,000 3.2%
Executive officers and directors
as a group (7 persons) (9) 5,249,942 57.2%
----------------
* Less than 1%

(1) Percentage of ownership is calculated as required by Commission Rule
13d-3(d)(1). The table above includes the number of shares underlying
options and warrants which are exercisable within 60 days after the date of
this proxy statement.
(2) Includes: (a) 600,000 shares owned by Sueling Wang's four children, (b)
141,204 shares owned by Yik-Li Sih, Sueling Wang's wife, in which Dr. Wang
may be deemed to have pecuniary interest. Dr. Wang disclaims beneficial
ownership of such 741,204 shares. Also includes 250,000 shares subject to
options that are currently exercisable.
(3) Includes 200,000 shares subject to options that are currently exercisable.
(4) Includes 75,000 shares subject to options that are currently exercisable.
(5) Includes 10,000 shares subject to options that are currently exercisable.
(6) Includes 5,000 shares subject to options that are currently exercisable.
(7) Includes 5,000 shares subject to options that are currently exercisable.
(8) Includes 75,000 shares underlying options that are currently exercisable.
Mr. Brennan is no longer with the Company as the result of the
discontinuation of the Logical Imaging Solutions' operations as of
September 30, 2002.
(9) Includes 570,000 shares subject to options that are exercisable within 60
days after the date of this prospectus.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Directors, Jui-Hung Wang, Jui-Kung Wang, Sueling Wang and Jui-Chi Wang, own
Kings Brothers, LLC, the landlord from which we lease our Norcross, Georgia
plant. For the nine months ended September 30, 2002, we paid Kings Brothers LLC
$388,863 in lease payments. For the years ended December 31, 2001 and 2000, the
lease payments for the plant were $505,836 and $186,427, respectively. The lease
was made on April 1, 1999 and expires in April 2009.

On November 19, 2001, we borrowed $200,000 on an unsecured basis from Kings
Brothers LLC. The revolving loan bears interest at the rate of 9% per annum,
matures on November 18, 2002 and is evidenced in writing. We paid the principal
and interest outstanding on December 10, 2001, paying $790.38 in total interest
to Kings Brothers. We borrowed this amount for general corporate purposes,
including working capital. On March 20, 2002 the revolving loan arrangement was
cancelled.

We also had a short-term unsecured loan, due July 26, 2000, evidenced in writing
from Kings Brothers of $240,000 with interest at 8%, paying $5,576 of interest
for the year. As of December 31, 2000, all amounts outstanding under the loan
were repaid. We used the proceeds of this loan for working capital.

On June 1, 1999, the Development Authority of Gwinnett County, Georgia issued
$4,100,000 of industrial development revenue bonds on behalf of us and Kings
Brothers LLC. Pursuant to a certain joint debtor agreement we are jointly and
severally liable with Kings Brothers to pay the amounts borrowed under the bond.
The 3.5% revenue bonds are payable in varying annual principal and monthly
interest payments through July 2019. The bonds are collateralized by all of our
assets and the real property leased by us and owned by Kings Brothers. The
majority of the proceeds $3,125,872 from the bond issue were used by us to
relocate our manufacturing plant, make leasehold improvements at the new
facility and to purchase certain manufacturing equipment. The remaining proceeds
$974,128 were used by Kings Brothers to pay down the mortgage on its real
property, some of which is leased to us. The proceeds used by Kings Brothers
have been recorded as a receivable on our financial statements. We entered into
a Joint Debtor Agreement with Kings Brothers LLC concerning their rights, duties
and obligations in connection with the bonds. Kings Brothers and we,
collectively, are obligated to repay any outstanding debt under the bonds.
Amounts receivable from Kings Brothers are secured by a lien on all of Kings
Brothers' real estate, including the part we lease from them, and by personal
guarantees by the members of Kings Brothers. Principal due and paid by Kings
Brothers for the nine months ended September 30, 2002 was $79,596 while interest
due and paid by Kings Brothers for the nine months ended September 30, 2002 was
$10,892. Principal due and paid by Kings Brothers to us during the years ending
December 31, 2001 and 2000 was $76,032 and $0, respectively. Interest due and
paid by Kings Brothers to us during the years ending December 31, 2001 and 2000
was $30,368 and $22,255, respectively. As of September 30, 2002, the principal
outstanding was $3,445,000 and the portion due to us from Kings Brothers was
$818,500.

Directors Jui-Hung Wang, Jui-Kung Wang, Jui-Chi Wang, are owners in and
Chairman, Auditor and President, respectively, of General Plastic Industrial
Co., LTD (GPI), a Taiwanese manufacturer of injection molded cartridges and
accessories for copiers and laser printers. GPI also owned and operated GPI-USA,
Inc. (GPI-USA) a wholly-owned United States distributor of GPI's products. For
the nine months ended September 30, 2002, we purchased $1,627,165 of injected
molded products from GPI. In 2001, we purchased $4,005,508 of injected molded
copier and laser printer products from GPI for resale. In 2000, we purchased
from GPI and GPI-USA $268,966 and $166,526, respectively, of copier and laser
printer products.

Directors, Jui-Hung Wang, Jui-Kung Wang, Sueling Wang and Jui-Chi J. Wang,
collectively have beneficial ownership interests of 32.6% in AccuRec, LLC, a
distributor of digital versatile disks. From time to time during the year ending
December 31, 2000, we had short-term unsecured loans evidenced in writing and
due on demand issued to AccuRec aggregating $1,850,000 and a maximum outstanding
at any one time of $500,000. The interest rate on these loans was 8%, and we
paid a total of $6,244 in interest during 2000. As of December 31, 2000 all
amounts outstanding under such loans were repaid. We used the proceeds from
these loans for working capital purposes.

Director, Sueling Wang, as trustee for two of his children, loaned us a total of
$252,000 from 1998 to 1999 at an interest rate of 12% with principal and
interest due at expiry. Each of the loans was paid in full during July 2000, and
we paid interest in the aggregate amount of $47,205 on these loans. We used the
proceeds of this loan for working capital purposes.

On March 14, 2002, we borrowed $500,000 from director, Sueling Wang, on an
unsecured basis. The interest rate on the loan was 12% per annum, matured on
March 14, 2003 and is evidenced in writing. On September 2, 2002, we entered
into a modification agreement with Sueling Wang to change the terms of the note,
extending the term to March 1, 2005, providing for a $100,000 principal payment,
decreasing the interest rate to 6% per annum, providing for interest only
payments through February 28, 2003, and providing for 24 monthly payments of
principal and interest beginning on April 1, 2003, in the amount of $17,735.67.
We borrowed the $500,000 amount to meet a supplier commitment for product.
Through September 30, 2002, interest paid on the note was $30,247. As of
September 30, 2002, the principal outstanding was $400,000.

On August 21, 2002, we borrowed $100,000 from director, Jui-Chi Wang, on an
unsecured basis. The loan bears interest at the rate of 6% per annum, matures on
March 1, 2005 and is evidenced in writing. We borrowed this amount in order to
repay $100,000 borrowed from director Sueling Wang on March 14, 2002. The note
is interest only through February 28, 2003, and then is fully amortizing over 24
months with principal and interest payments payable monthly beginning April 1,
2003 in the amount of $4,434. As of September 30, 2002, interest accrued and
unpaid on the note was $658, and $100,000 was the outstanding principal balance.

On August 21 and September 2, 2002, we borrowed $200,000 and $300,000,
respectively, from director, Jui-Hung Wang, on an unsecured basis. The loan
bears interest at the rate of 6% per annum, matures on March 1, 2005 and is
evidenced in writing. We borrowed this amount in order to make a principal
payment due on our industrial development bond in the approximate amount of
$255,000, for the acquisition of capital equipment in the approximate of
$125,000 and for general corporate purposes. The note is interest only through
February 28, 2003, and then is fully amortizing over 24 months with principal
and interest payments payable monthly beginning April 1, 2003 in the amount of
$22,169.60. As of September 30, 2002, interest accrued and unpaid on the note
was $2,698, and the principal balance was $500,000.

Directors Jui-Chi Wang and Jui-Hung Wang purchased 350,000 and 50,000 Units
(each Unit consisted of one share of common stock and a warrant to purchase one
share of common stock at an exercise price of $2.00 per share) for $700,000 and
$100,000, including promissory notes, respectively. Jui-Chi Wang's $700,000
recourse promissory note without interest was made on December 1, 2001, due
December 31, 2001 and paid in full on December 18, 2001. Jui-Hung Wang's $99,500
recourse promissory note without interest was made on December 24, 2001, due
April 1, 2002 and paid in full on January 30, 2002. The terms of the notes were
consistent with the terms of notes of third parties who purchased Units in the
private placement from Color Imaging.

We believe that the terms of the loans and borrowings from affiliates were on
terms more favorable than were otherwise available from third parties.

On September 11, 2002, we entered into a share exchange agreement with four of
our directors, Messrs. Brennan, St. Amour, Langsam and Hollander, whereby a new
company, Digital Color Print, Inc., owned by them, acquired the capital stock of
our wholly owned subsidiary, Logical Imaging Solutions, in exchange for
approximately 1.6 million shares of the our common stock. On September 20, 2002,
we entered into an amendment to the share exchange agreement pursuant to which
the number of shares of the our common stock to be exchanged for the capital
stock of Logical Imaging Solutions was increased from 1.6 million to 1.7 million
and a requirement was added that Logical Imaging Solutions have at least
$100,000 on hand at closing. On September 30, 2002, the share exchange
transaction was closed, and the 1.7 million shares of our stock were received
and retired by our stock transfer agent. See "Color Imaging, Inc. - Recent
Developments" beginning on page 11.

DESCRIPTION OF SECURITIES

Our articles of incorporation authorize the issuance of up to 20,000,000 shares
of common stock, $0.01 par value per share. At the June 10, 2002 annual meeting
of stockholders, Color Imaging received approval from its stockholders to
increase, if necessary, the authorized common shares by 10 million shares. As of
September 30, 2002, 8,437,965 shares of our common stock are issued and
outstanding. Our articles of incorporation also authorize the issuance of up to
1,000,000 shares of preferred stock, $0.01 par value per share. As of the date
of this prospectus, we have no issued and outstanding preferred stock, and we
currently have no plans to issue any shares of preferred stock. The board of
directors does, however, have the authority, without action by the stockholders,
to issue all or any portion of the authorized but unissued preferred stock in
one or more series and to determine the voting rights, preferences as to
dividends and liquidation, conversion rights, and other rights of such series.
Such preferred stock, if and when issued, may carry rights superior to those of
the common stock.

On all matters submitted to a vote of the stockholders, each holder of common
stock has the right to one vote for each share held of record. Subject to any
dividend preferences granted to any preferred stock that may be outstanding in
the future, holders of our common stock are entitled to receive ratably such
dividends as may be declared by the board of directors. In the event of a
liquidation, dissolution or winding up of our company, holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding shares of
preferred stock. Holders of our common stock have no preemptive rights and no
right to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to our common stock.

In September 2001, Color Imaging amended its bylaws to increase the number of
directors to eleven and to provide for a minimum of five and a maximum of eleven
directors.

CHARTER PROVISIONS AND DELAWARE LAWS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT

Some provisions of Delaware law and our amended and restated certificate of
incorporation and bylaws could make the following more difficult:

o acquisition of us by means of a tender offer;

o acquisition of us by means of a proxy contest or otherwise; or

o removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive takeover
practices and inadequate takeover bids. These provisions are also designed to
encourage persons seeking to acquire control of us to first negotiate with our
Board of Directors. We believe that the benefits of increased protection of our
potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure us outweigh the disadvantages of
discouraging such proposals because negotiation of such proposals could result
in an improvement of their terms.

Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless the "business combination"
or the transaction in which the person became an interested stockholder is
approved in a prescribed manner. Generally, a "business combination" includes a
merger, asset or stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder" is
a person who, together with affiliates and associates, owns or within three
years prior to the determination of interested stockholder status, did own, 15%
or more of a corporation's voting stock. The existence of this provision may
have an anti- takeover effect with respect to transactions not approved in
advance by the Board of Directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held by
stockholders.

Elimination of Cumulative Voting. Our amended and restated certificate of
incorporation and bylaws do not provide for cumulative voting in the election of
directors. Cumulative voting provides for a minority stockholder to vote a
portion or all of its shares for one or more candidates for seats on the Board
of Directors. Without cumulative voting, a minority stockholder will not be able
to gain as many seats on our Board of Directors based on the number of shares of
our stock that such stockholder holds than if cumulative voting were permitted.
The elimination of cumulative voting makes it more difficult for a minority
stockholder to gain a seat on our Board of Directors and to influence the Board
of Directors' decision regarding a takeover.

Undesignated Preferred Stock. The authorization of undesignated preferred stock
makes it possible for the Board of Directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change the control of our company. These and other provisions may
have the effect of deterring hostile takeovers or delaying changes in control or
management of our company.

TRANSFER AGENT

The transfer agent and registrar for our common stock is American Stock Transfer
and Trust Company, Brooklyn, New York.

SELLING STOCKHOLDERS

The shares set forth in the table below are being offered by the selling
stockholders listed below. We have registered these shares for the selling
stockholders in this offering because of registration rights we granted to the
selling stockholders when we sold our common stock to them. Some of the common
stock listed in the table is not presently owned by the selling stockholders,
but is issuable upon exercise of warrants. The selling stockholders are not
required to sell all or any of the common stock. We believe that the
registration of the shares underlying the warrants, even though we may not be
obligated to do so, will encourage the warrant holders to exercise the warrants,
thereby benefiting us because we will receive the exercise price paid.

The following table states the name of each of the selling stockholders, states
the number of shares of our common stock beneficially owned by each selling
stockholder as of January 17, 2003, number of shares which may be sold for the
account of each selling stockholder, the number of shares of common stock that
will be beneficially owned by each selling stockholder after the completion of
the offering assuming the sale of all shares offered, and the percentage of
Color Imaging common stock owned by each selling stockholder after the
completion of the offering, assuming the sale of all shares offered.

BENEFICIAL OWNERSHIP
AFTER THE OFFERING (2)
SHARES OWNED SHARES TO BE --------------------------------------
NAME BEFORE OFFERING (1) SOLD IN OFFERING SHARES PERCENTAGE
------------------------------------- ------------------- ------------------ ----------------- ---------------

The Blaine Group, Inc. (3)........... 10,000 10,000 0 0
Sueling Wang (4)..................... 1,815,347 856,847 958,500 11.4%
Gerald M. Chizever (5)............... 45,000 45,000 0 0
Allan Duboff (6)..................... 10,000 10,000 0 0
Kresimir Peharda (7)................. 5,455 5,455 0 0
Fredric N. Richman (8)............... 25,000 25,000 0 0
Yik-Li Sih (9)....................... 141,204 95,204 46,000 *
Sal G. Giacinto (10)................. 15,000 15,000 0 0
Patrick D. Salas (11)................ 15,000 15,000 0 0
Brian N. Hollander (12).............. 20,000 20,000 0 0
Howard Kaufman (13).................. 2,629 2,000 629 *
Jui-Chi Wang (14).................... 689,450 618,835 70,615 *
Maynard Hollander (15)............... 50,000 50,000 0 0
Shobha Patel (16).................... 12,260 7,260 5,000 *
Mark Edward Palmer (17).............. 9,000 9,000 0 0
Victor A. Hollander (18)............. 105,000 100,000 5,000 0
Jui-Hung Wang (19)................... 704,178 563,173 141,005 1.7%
Chechang Yeh......................... 445,205 145,205 300,000 3.6%
Jui-Kung Wang.(20)................... 321,209 120,204 201,005 2.4%
Burns Hoffman (21)................... 200,000 200,000 0 0
Doug Casey (22)...................... 100,000 100,000 0 0
Morris H. Wolf (23).................. 25,000 25,000 0 0
Arash Khalili (24)................... 2,000 2,000 0 0
Howard N. Addison (25)............... 30,000 30,000 0 0
Neal McNally (26).................... 25,000 25,000 0 0
Carl H. Spatz (27)................... 8,697 5,000 3,697 *
Lancing Holdings Ltd. (28)........... 40,000 40,000 0 0
Thomas D. Hesselbrock (29)........... 8,697 5,000 3,697 *
Lionel Brown (30).................... 25,000 25,000 0 0
Flora Chung (31)..................... 8,529 3,529 5,000 *
Chia-An L. Shieh (32)................ 17,196 7,058 10,138 *
John G. Myers (33)................... 58,951 58,951 0 0
Larry Gordon (34).................... 70,886 70,886 0 0
Stephen Chromik (35)................. 450,000 450,000 0 0
Colin J. Reynolds (36)............... 10,000 10,000 0 0
Michael Edson (37)................... 38,880 38,880 0 0
IndustriCorp and Co., Inc. FBO
David N. Kunz IRA Rollover (38)... 50,000 50,000 0 0

G-V Capital Corp. (39)............... 200,000 100,000 100,000 0
------------------- ----------------- -----------------
Total................................ 5,809,773 3,959,487 1,850,286

* Less than 1%

(1) Percentage of ownership for each holder is calculated based on 8,437,965
shares of common stock outstanding on September 30, 2002. Beneficial
ownership is determined in accordance with the SEC Rule 13d-3 and generally
includes shares over which the holder has voting or investment power,
subject to community property laws. All shares of common stock obtainable
upon conversion of securities or exercise of stock options or warrants
(including those that are not currently exercisable but will become
exercisable within 60 days hereafter) are considered to be beneficially
owned by the person holding the options or warrants for computing that
person's percentage, but are not treated as outstanding for computing the
percentage of any other person.

(2) Assumes all offered Color Imaging common stock will be sold and that no
additional shares of Color Imaging common stock will be issued by Color
Imaging or acquired by any selling stockholder prior to the completion of
the offering.

(3) Devon Blaine is the principal and sole stockholder of the Blaine Group,
Inc.

(4) Of the 1,815,347 shares beneficially owned by Dr. Wang before the offering,
Dr. Wang owns directly 965,347 shares of our common stock. Also included in
this total are 600,000 shares owned by Dr. Wang's four children and Dr.
Wang's exercisable options to purchase 250,000 shares of our common stock.
The beneficial shares owned by Dr. Wang excludes 141,204 shares of common
stock beneficially owned by his wife, Yik-Li Sih, who is a selling
stockholder. Of the 965,347 shares of common stock owned directly by Dr.
Wang prior to the offering, 856,847 shares are offered hereby. Dr. Wang is
a director and officer of our company.

(5) Mr. Chizever owns directly 22,500 shares of our common stock and 22,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder. Mr. Chizever is a partner
of Richman Mann Chizever Phillips & Duboff, our former legal counsel.

(6) Mr. Duboff owns directly 5,000 shares of our common stock and 5,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder. Mr. Duboff is a partner of
Richman Mann Chizever Phillips & Duboff, our former legal counsel.

(7) Mr. Peharda owns directly 3,955 shares of our common stock and 1,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder. Mr. Peharda is an attorney
at Richman Mann Chizever Phillips & Duboff, our former legal counsel.

(8) Mr. Richman owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder. Mr. Richman is a partner
of Richman Mann Chizever Phillips & Duboff, our former legal counsel.

(9) The 141,204 shares of common stock beneficially owned by Ms. Sih are not
included in the totals for Dr. Sueling Wang as described in note 4 above.
Of the 141,204 shares owned by Ms. Sih, 95,204 may be sold for the account
of the selling stockholder.

(10) Mr. Giacinto owns directly 7,500 shares of our common stock and 7,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(11) Mr. Salas owns directly 7,500 shares of our common stock and 7,500 warrants
exercisable into shares of our common stock. All such shares and shares of
our common stock issuable upon exercise of the warrants may be sold for the
account of the selling stockholder.

(12) Mr. Hollander owns directly 10,000 shares of our common stock and 10,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(13) Mr. Kaufman owns directly 2,629 shares of our common stock and warrants
exercisable into shares of our common stock. Of the 2,629 shares of our
common stock owned directly by Mr. Kaufman, 1,000 shares and 1,000 shares
of our common stock issuable upon exercise of the warrants may be sold for
the account of the selling stockholder.

(14) Of the 689,450 shares owned before the offering, Mr. Wang owns directly
679,450 shares of our common stock and has exercisable options to purchase
another 10,000 shares of our common stock. Of the 679,450 shares of our
common stock owned directly by Mr. Wang, 618,835 are offered in this
prospectus. Mr. Wang is one of our directors.

(15) Mr. Hollander owns directly 25,000 shares of our common stock and 25,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(16) Of the 12,260 shares owned by Ms. Patel before the offering, Ms. Patel owns
directly 7,260 shares of our common stock and has exercisable options to
purchase another 5,000 shares of our common stock. Of the 7,260 shares of
our common stock owned directly by Ms. Patel, all 7,260 are included in
this prospectus. Ms. Patel is one of our managers.

(17) Mr. Palmer owns directly 4,500 shares of our common stock and 4,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(18) Of the 105,000 shares owned by Mr. Hollander before the offering, Mr.
Hollander owns directly 50,000 shares of our common stock, 50,000 warrants
exercisable into shares of our common stock and 5,000 exercisable options
to purchase shares of common stock. Of the 105,000 shares owned by Mr.
Hollander, the 50,000 shares and 50,000 shares issuable upon exercise of
the 50,000 warrants are offered in this prospectus. Mr. Hollander was one
of our directors until his resignation on September 30, 2002, the closing
date for the share exchange transaction whereby we disposed of Logical
Imaging Solutions.

(19) Of the 704,178 shares owned before the offering by Mr. Wang, 699,178 shares
are owned directly and Mr. Wang has exercisable options to purchase another
5,000 shares of our common stock. Of the 699,178 shares owned directly by
Mr. Wang, 563,173 are offered in this prospectus and may be sold for the
account of the selling stockholder. Mr. Wang is one of our directors.

(20) Of the 321,209 shares owned before the offering by Mr. Wang, 316,209 shares
are owned directly and Mr. Wang has exercisable options to purchase another
5,000 shares of our common stock. Of the 316,209 shares owned directly by
Mr. Wang, 120,204 are offered in this prospectus and may be sold for the
account of the selling stockholder. Mr. Wang is one of our directors.

(21) Mr. Hoffman owns directly 100,000 shares of our common stock and 100,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(22) Mr. Casey owns directly 50,000 shares of our common stock and 50,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(23) Mr. Wolf owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(24) Mr. Khalili owns directly 1,000 shares of our common stock and 1,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(25) Mr. Addison owns directly 15,000 shares of our common stock and 15,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(26) Mr. McNally owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(27) Mr. Spatz owns directly 6,197 shares of our common stock. Of the 6,197
shares of our common stock owned by Mr. Spatz, 5,000 are included in this
prospectus and consist of 2,500 shares of our common stock and 2,500 shares
of our common stock issuable upon exercise of warrants to purchase our
common stock, all of which may be sold for the account of the selling
stockholder.

(28) Lancing Holdings Ltd. owns directly 20,000 shares of our common stock and
20,000 warrants exercisable into shares of our common stock. All such
shares and shares of our common stock issuable upon exercise of the
warrants may be sold for the account of the selling stockholder. John
Nichols is the principal and beneficial owner of Lancing Holdings Ltd.

(29) Mr. Hesselbrook owns directly 6,197 shares of our common stock of which
5,000 shares may be sold for the account of the selling stockholder. Total
shares owned before the offering includes 2,500 shares of common stock
underlying warrants to purchase common stock.

(30) Mr. Brown owns directly 12,500 shares of our common stock and 12,500
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(31) Of the 8,529 shares owned by Flora Chung before the offering, Ms. Chung
owns directly 3,529 shares of our common stock and has exercisable options
to purchase another 5,000 shares of our common stock. Of the 3,529 shares
owned directly by Ms. Chung, all are offered in this prospectus. Ms. Chung
is our accounting manager.

(32) Of the 17,196 shares owed by Ms. Shieh before the offering, Ms. Shieh owns
directly 7,058 shares of our common stock and has exercisable options to
purchase 5,000 shares of our common stock. Also included in the shares
owned by Ms. Shieh before the offering are 5,138 shares of our common stock
owned by Ms. Shieh's spouse, Shiuh An Shieh. Of the 7,058 shares owned
directly by Ms. Shieh, all 7,058 are offered in this prospectus. Ms. Shieh
is our controller and an assistant secretary.

(33) Includes 58,951 warrants exercisable into shares of our common stock. All
such shares of our common stock issuable upon exercise of the warrants may
be sold for the account of the selling stockholder.

(34) Includes 70,886 warrants exercisable into shares of our common stock. All
such shares of our common stock issuable upon exercise of the warrants may
be sold for the account of the selling stockholder.

(35) Mr. Chromik owns directly 150,000 shares of our common stock and 300,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(36) Mr. Reynolds owns directly 5,000 shares of our common stock and 5,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(37) Mr. Edson owns directly 12,960 shares of our common stock and 25,920
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(38) Mr. Kunz IRA owns directly 25,000 shares of our common stock and 25,000
warrants exercisable into shares of our common stock. All such shares and
shares of our common stock issuable upon exercise of the warrants may be
sold for the account of the selling stockholder.

(39) G-V Capital Corp. owns directly 100,000 shares of our common stock and
100,000 warrants exercisable into shares of our common stock. G-V Capital
Corp. was our investment banking advisors for our merger with Color Image,
Inc. and Logical Imaging Solutions, Inc., and they received their shares
and exercisable warrants in return for their services rendered to us from
January through June 2000 at the completion of the merger in June 2000.
100,000 shares of our common stock issuable upon exercise of the warrants
may be sold for the account of the selling stockholder. Lawrence E. Kaplan
is the principal and beneficial owner of G-V Capital Corp.

PLAN OF DISTRIBUTION

SHARES OFFERED BY COLOR IMAGING, INC.

The shares of common stock are being offered by us on a best efforts basis with
respect to the 7,000,000 shares, which will be made available to the public at
$1.35 per share, the average of the closing prices of our common stock for the
15 trading days prior to the effective date of this offering. No one has
committed to purchase any of the shares offered. We will allow our directors,
officers and affiliates of us to purchase up to $7,000,000 of the shares offered
in this offering. There can be no assurance that any or all of the shares being
offered will be sold. No commissions or other fees will be paid, directly or
indirectly, by us to any person or firm in connection with solicitation of sales
of the shares. We have not, and do not intend to establish a maximum number of
shares that can be purchased by each investor in the offering. We will require
investors to purchase at least 100,000 shares.

Our officers and directors will offer and sell the shares of common stock
directly to investors in specific states in which these securities are
registered or are exempt from registration, following the procedures for
subscribing as outlined herein and in compliance with Regulation M, promulgated
under the Securities Exchange Act. Color Imaging does not plan to use the
Internet to offer its securities.

Since the offering is self-underwritten, we will distribute this prospectus to
potential investors with whom management is acquainted who may be or who are
interested in us and a possible investment in the offering. Since a substantial
minimum investment is required to subscribe to our offering, it is contemplated
that some investor(s), particularly individual investors, may need several
months to either make an investment decision, obtain the necessary liquidity or
to advantageously time the investment. Officers and directors will not receive
any commission from the sale of any shares of common stock. Officers and
directors will not register as broker-dealers pursuant to Section 15 of the
Securities and Exchange Act of 1934 in reliance upon Rule 3a4-1, which sets
forth those conditions under which a person associated with an issuer may
participate in the offering of the issuer's securities and not be deemed to be a
broker-dealer. These conditions include the following:

o none of the selling persons are subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of the
Exchange Act, at the time of participation;

o none of such persons are compensated in connection with his or her
participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in securities;

o none of the selling persons are, at the time of participation, an
associated person of a broker-dealer; and

o all of the selling persons meet the conditions of paragraph (a)(4)(ii)
of Rule 3a4-1 of the Exchange Act, in that they:

o primarily perform or are intending primarily to perform at the end of
the offering, substantial duties for or on behalf of the issuer
otherwise than in connection with transactions in securities; and

o are not a broker or dealer, or an associated person of a broker or
dealer, within the preceding twelve months; and

o do not participate in selling and offering of securities for any
issuer more than once every twelve months other than in reliance on
this rule.

This offering will commence on the date of this prospectus and continue until
February 14, 2003. We may terminate this offering at any time, for any reason;
thus not selling any or all of the shares of common stock offered. There is no
minimum number of shares of common stock that we are required to sell.

SUBSCRIPTION PROCEDURE

If you decide to subscribe for shares of common stock in this offering, you will
be required to execute a subscription agreement and tender it, together with a
check or wired funds to us, for acceptance or rejection. A copy of the form of
the subscription agreement is attached hereto as Exhibit A. You may subscribe
for the minimum number or more of our shares of common stock in this offering.
All checks should be made payable to Color Imaging, Inc. We will accept or
reject all subscriptions for shares of our common stock within five business
days, providing time for checks to be cleared by Color Imaging's bank for
subscriptions accompanied by a check. Subscriptions for our shares paid by wired
funds will be accepted or rejected within one day of receipt. All monies from
rejected subscriptions will be returned immediately by us to the subscriber,
without interest or deductions. We have the right to accept or reject
subscriptions in whole or in part, for any reason or for no reason. No
subscriptions or monies will be accepted until the final prospectus is issued to
investors.

Once accepted, the funds will be deposited in an account maintained by us and
considered assets of Color Imaging once cleared by our bank. Subscription funds
will not be deposited in an escrow account. We will immediately use all of the
proceeds received from the sale of shares of common stock. The proceeds shall be
non-refundable except as required by law. Certificates for the purchase of our
shares will be issued and distributed by our transfer agent, within 10 days
after a subscription is accepted and funds are received in our account.
Certificates will be sent to the address supplied in the investor's subscription
agreement.

SELLING STOCKHOLDERS

We are registering the sale of the common stock and common stock underlying
warrants on behalf of the selling stockholders, who are free to offer and sell
our stock at such times, in such manner and at such prices as they may
determine. We will pay the costs of registering the sales of our stock. Our
common stock may be offered by the selling stockholders in one or more types of
transactions, which may or may not involve brokers, dealers or cash
transactions. The selling stockholders may also use Rule 144 under the
Securities Act to sell our stock, if they meet the criteria and conform to the
requirements of that rule. There is no underwriter or coordinating broker acting
in connection with the proposed sale of our stock by the selling stockholders.
The sales of our stock may also be effected from time to time by the following
means:

o transactions on the OTC Bulletin Board at market price through
ordinary broker transactions, including block transactions;

o negotiated transactions; or,

o a combination of the above methods of sale at fixed prices, which may
be changed, at market prices prevailing at the time of sale, or at
negotiated prices

The selling stockholders may sell common stock directly to purchasers or through
broker-dealers which may act as agents or principals. Broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders.

The selling stockholders and any broker-dealers that act in connection with the
sale of our common stock may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, and any commissions received by them and
any profit on the resale of our stock as principal may be deemed to be
underwriting discounts and commissions under the Securities Act. The selling
stockholders may agree to indemnify any agent, dealer commissions or broker-
dealer that participates in transactions involving sales of our stock against
certain liabilities, including liabilities arising under the Securities Act.

Because the selling stockholders may be deemed to be underwriters, they will be
subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a distribution of our stock, the selling
stockholders, any selling broker-dealer and any affiliated purchasers may be
subject to Regulation M, which prohibits any stabilizing bid or stabilizing
purchase for the purpose of pegging, fixing or stabilizing the price of our
common stock in connection with that distribution. As used herein, selling
stockholders, includes donees and pledgees selling our shares from a named
selling stockholder after the date of this prospectus.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will be
passed upon for Color Imaging by Arnall Golden Gregory LLP, Atlanta, Georgia.

INDEPENDENT AUDITORS

The consolidated financial statements of Color Imaging as of December 31, 2001,
and for each of the years in the two-year period ended December 31, 2001,
included in this prospectus and elsewhere in the registration statement have
been so included herein in reliance upon the report of Lazar Levine & Felix LLP,
and upon the authority of said firm as experts in accounting and auditing.

INDEMNIFICATION

Our certificate of incorporation allows us to indemnify our officers and
directors to the maximum extent allowed under Delaware law. This includes
indemnification for liability which could arise under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant under these provisions, the registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

FURTHER INFORMATION

You should rely only on the information in this prospectus or any prospectus
supplement hereto this prospectus. We have not authorized anyone else to provide
you with different information. Offers of the securities are being made only in
states where the offers are permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.

This prospectus is part of a Registration Statement on Form SB-2 that has been
filed with the SEC. It does not include all of the information that is in the
registration statement and the additional documents filed as exhibits with it.
For more detailed information, you should read the exhibits themselves.

We are subject to the informational requirements of the Exchange Act and, in
accordance with it, are required to file reports, proxy and information
statements, and other information with the SEC. Such reports, proxy and
information statements and other information can be inspected and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information about the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. We electronically file reports, proxy
and information statements, and other information with the SEC. The SEC
maintains an Internet website that contains our electronically filed reports,
proxy and information statements, and other information at http://www.sec.gov.
We maintain Internet websites at http://www.colorimage-micr.com. Our common
stock is traded on the NASDAQ OTC Bulletin Board under the symbol CIMG.

INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Consolidated Condensed Balance Sheets at September 30, 2002
(Unaudited) and December 31, 2001(Audited)........................... .......F-2

Consolidated Condensed Statements of Operations (Unaudited)
for the Nine Months ended September 30, 2002 and 2001........................F-3

Consolidated Condensed Statements of Cash Flows (Unaudited)
for the Nine Months ended September 30, 2002 and 2001........................F-4

Notes to Interim Unaudited Consolidated Condensed Financial
Statements...................................................................F-5

Report of Independent Certified Public Accountants...........................F-8

Consolidated Balance Sheets
for the years ended December 31, 2001 and 2000 (Restated) ...................F-9

Consolidated Statement of Operations
for the years ended December 31, 2001 and 2000 (Restated)...................F-10

Consolidated Statements of Stockholders' Equity
for the years ended December 31, 2001 and 2000 (Restated)...................F-11

Consolidated Statements of Cash Flows
for the years ended December 31, 2001 and 2000 (Restated)...................F-12

Notes to Consolidated Financial Statements
for the years ended December 31, 2001 and 2000 (Restated)...................F-13

F-1

COLOR IMAGING, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

30-Sept-02 31-Dec-01
(Unaudited) (Audited)
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 113,539 $ 393,981
Accounts receivable, net 2,863,728 2,894,003
Inventory 5,296,787 5,604,975
Deferred income taxes 23,508 190,509
Related party portion of IDR bond 83,160 79,596
Other current assets 276,188 335,621
Net assets of discontinued subsidiary -- 2,264,117
------------ ------------
TOTAL CURRENT ASSETS 8,656,910 11,762,802
------------ ------------

PROPERTY, PLANT AND EQUIPMENT - NET 7,143,967 7,013,070
------------ ------------
OTHER ASSETS
Related party portion of IDR bond 735,340 818,500
Other assets 306,361 222,131
------------ ------------
TOTAL OTHER ASSETS 1,041,701 1,040,631
------------ ------------
$ 16,842,578 $ 19,816,503
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Revolving credit lines $ 1,092,281 $ 1,462,416
Accounts payable 4,205,351 4,841,414
Current portion of notes payable 358,653 340,232
Current portion of bonds payable 350,000 335,000
Notes payable - related parties 279,203 --
Other current liabilities 472,186 432,043
------------ ------------
TOTAL CURRENT LIABILITIES 6,757,674 7,411,105
------------ ------------
LONG TERM LIABILITIES
Notes payable 1,082,521 1,352,893
Bonds payable 3,095,000 3,445,000
Notes payable - related parties 720,797 --
------------ ------------
LONG TERM LIABILITIES 4,898,318 4,797,893
------------ ------------
TOTAL LIABILITIES 11,655,992 12,208,998
------------ ------------
COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 20,000,000
shares; 8,437,965 and 10,099,175 shares issued and
outstanding on September 30, 2002 and
December 31, 2001, respectively 84,380 100,992
Additional paid-in capital 7,205,908 9,873,939
Stock subscription receivable -- (149,000)
Retained earnings (accumulated deficit) (2,103,702) (2,218,426)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 5,186,586 7,607,505
------------ ------------
$ 16,842,578 $ 19,816,503
============ ============

See accompanying notes

F-2

COLOR IMAGING, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTH PERIODS ENDED NINE MONTH PERIODS ENDED
30-Sept-02 30-Sept-01 30-Sept-02 30-Sept-01
------------ ----------- ------------ ------------

SALES $ 6,654,366 $ 9,711,931 $22,285,989 $23,056,235

C0ST OF SALES 5,460,287 8,417,173 18,776,922 19,778,728
------------ ------------ ------------ ------------
GROSS PROFIT 1,194,079 1,294,758 3,509,067 3,277,507
------------ ------------ ------------ ------------

OPERATING EXPENSES

Administrative 304,491 372,061 999,106 1,123,731

Research & development 237,553 195,695 688,660 552,408

Sales & marketing 351,568 375,485 963,645 882,878
------------ ------------ ------------ ------------
893,612 943,241 2,651,411 2,559,017
------------ ------------ ------------ ------------

INCOME FROM OPERATIONS 300,467 351,517 857,656 718,490
------------ ------------ ------------ ------------

OTHER INCOME (EXPENSE)

Other income (9,434) 15,230 19,771 26,216

Financing expenses (84,820) (90,152) (250,640) (311,065)

------------ ------------ ------------ ------------
(94,254) (74,922) (230,869) (284,849)
------------ ------------ ------------ ------------

INCOME BEFORE TAXES 206,213 276,595 626,787 433,641

PROVISION FOR INCOME TAXES 89,488 94,436 250,738 142,246
------------ ------------ ------------ ------------
NET INCOME FROM
CONTINUING OPERATIONS 116,725 182,159 376,049 291,395

DISCONTINUED OPERATIONS (Note 2)
(Loss) from operations of
subsidiary disposed of -
net of income taxes (98,244) (36,320) (261,326) (106,056)
------------ ------------ ------------ ------------

NET INCOME $ 18,481 $ 145,839 $ 114,723 $ 185,339
============ ============ ============ ============

INCOME (LOSS)
PER COMMON SHARE - BASIC
Continuing operations $ .01 $ .02 $ .04 $ .04
Discontinued operations $ (.01) $ .00 $ (.03) $ (.02)
------------ ------------ ------------ ------------
$ -- $ .02 $ .01 $ .02
============ ============ ============ ============
INCOME (LOSS)
PER COMMON SHARE - DILUTED
Continuing operations $ .01 $ .02 $ .04 $ .04
Discontinued operations $ (.01) $ .00 $ (.03) $ (.02)
------------ ------------ ------------ ------------
$ -- $ .02 $ .01 $ .02
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic 10,122,283 8,070,136 10,107,156 7,774,391
Assumed conversion -- 203,281 -- 166,205
------------ ------------ ------------ ------------
10,122,283 8,273,417 10,107,156 7,940,596
============ ============ ============ ============
See accompanying notes

F-3

COLOR IMAGING, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30
(UNAUDITED)

2002 2001
------------- -------------

Cash flows from operating activities:
Net income from continuing operations $ 376,049 $ 291,395
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 396,252 434,783
Deferred income taxes 167,001 136,144
Allowance for doubtful accounts 3,603 --
Decrease (increase) in:
Accounts receivable and other receivables 26,672 (161,292)
Inventories 308,188 (1,472,673)
Prepaid expenses and other assets (24,797) (33,732)
Due from related party - IDR bond 79,596 76,032
Increase (decrease) in:
Accounts payable and accrued liabilities (595,922) 1,090,175
------------- -------------
Net cash provided by
continuing operations 736,642 360,832

Net cash flows of discontinued operations (676,202) (216,815)
------------- -------------
Net cash provided by
operating activities 60,440 144,017
------------- -------------

Cash flows (used in) investing activities:
Capital expenditures (527,149) (188,610)
Other assets -- (125,449)
------------- -------------
Net cash (used in)
investing activities (527,149) (314,059)
------------- -------------
Cash flows from financing activities:
Net (payments) under line of credit (370,135) (166,806)
Net proceeds from sale of common stock 143,351 1,156,877
Net proceeds from related party borrowings 1,000,000 --
Principal payments of long-term debt (586,949) (539,353)
------------- -------------
Net cash provided by
financing activities 186,267 450,718
------------- -------------
Net (decrease) increase in cash (280,442) 280,676

Cash at beginning of year 393,981 338,463
------------- -------------
Cash at end of period $ 113,539 $ 619,139
============= =============

See accompanying notes

F-4

COLOR IMAGING, INC.
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited interim condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals
and adjustments) considered necessary for a fair presentation have been
included. Operating results for the three months and nine months ended September
30, 2002 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2002.

NOTE 2. DISCONTINUED OPERATIONS

On September 30, 2002, the Company completed a share exchange agreement with
Digital Color Print, Inc. and four of its former directors, whereby the Company
received 1.7 million shares of its common stock in exchange for all of the
shares of the common stock of its subsidiary, Logical Imaging Solutions, Inc.
Based upon guidance provided by APB 29 in connection with accounting for
nonmonetary transactions, the fair value of the 1.7 million shares of common
stock received was approximately $2,678,993; the fair value (approximating the
net book value) of Logical Imaging Solutions, Inc. plus the transaction costs
incurred.

Following is summary financial information for the Company's discontinued
Logical Imaging Solutions, Inc. subsidiary:

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
----------------- ---------------- ----------------- ----------------
(Loss) from discontinued operations:
Before income taxes $(146,244) $ (51,030) $(406,570) $(150,266)
Income tax provision (benefit) (48,000) (14,710) (145,244) (44,210)
----------------- ---------------- ----------------- ----------------
Net (loss) from discontinued operations $( 98,244) $ (36,320) $(261,326) $(106,056)
================= ================ ================= ================

Pursuant to the share exchange agreement, the Company also received a warrant to
purchase approximately 15% of the then outstanding common stock of Digital Color
Print, Inc. or Logical Imaging Solutions, Inc. The warrant has not been assigned
any value, since it is not cashless, increases from $1.50 to $2.25 and then to
$3.25 per share each year over three years, expires after three years, is not
registered for resale and has no current market.

NOTE 3. COMMON STOCK

On September 30, 2002, the Company completed a share exchange agreement with
Digital Color Print, Inc. (see note 2 above), whereby the Company received 1.7
million shares of the Company's common stock in exchange for all of the shares
of the common stock of Logical Imaging Solutions, Inc. As of September 30, 2002,
the 1.7 million shares of the Company's common stock were cancelled and retired.

From January 1, 2002 to September 30, 2002, one holder of the Company's warrants
exercised 1,750 warrants on a cashless basis and was issued 705 shares of the
Company's common stock. During March 2002, the Company rescinded one transaction
entered into during 2001 for the sale of 25,000 shares of common stock and
warrants to purchase 25,000 shares of the common stock of the Company. This
transaction was retroactively reflected in the financial statements as of
December 31, 2001. As of March 2002, all notes receivable from sales of Company
securities have been fully paid by the investors.

During August 2002 the Company issued 38,085 shares of its common stock to
warrant holders who exercised, on a cashless basis, 157,116 warrants that were
issued to them in exchange for their warrants to purchase the common stock of
Logical Imaging Solutions, Inc. at the time of the merger in June 2000. On
September 15, 2002, warrants to purchase 12,939 shares of the Company's common
stock issued in exchange for warrants to purchase the common stock of Logical
Imaging Solutions, Inc. at the time of the merger in June 2000, expired.

F-5

NOTE 3. COMMON STOCK (CONTINUED)

On July 8, 2002, the Company granted options to purchase 100,000 shares of the
Company's common stock to James Telsey, vice president, sales and marketing, at
an exercise price of $2.00 with options to purchase 25,000 shares of the
Company's common stock vesting on the grant date and the remainder vesting
equally upon the next three anniversaries of the grant date. The grant of the
options was approved by the board of directors of the Company at its annual
meeting on June 10, 2002.

On October 30, 2001, the Company issued and sold 1,000,000 shares of its common
stock to one investor in exchange for $2 million. The purchase price was $2.00
per share, of which $10,000 was payable in cash and $1,990,000 was payable in
the form of a recourse promissory note. The Company also agreed to issue up to
500,000 warrants exercisable at $2.00 per share to purchase the Company's common
stock. In March 2002, the Company and the investor mutually rescinded this
transaction and the Company has retroactively reflected this rescission as of
December 31, 2001.

NOTE 4. INVENTORIES

Inventories of continuing operations consisted of the following components as of
September 30, 2002 and December 31, 2001:

September 30, 2002 December 31, 2001
------------------ -----------------
Raw materials $ 1,269,306 $ 723,480
Work-in-process 1,430,084 967,982
Finished goods 2,775,608 3,987,343
Obsolescence allowance (178,211) (73,830)
----------------- -----------------
Total $ 5,296,787 $ 5,604,975
================= =================

NOTE 5. CHANGES TO BORROWING ARRANGEMENTS

The Company has a $2.5 million revolving line of credit, as amended, with an
outstanding balance as of September 30, 2002 of $1,092,281. At the end of each
month for the following month, the Company has the interest rate option of
either the one month Libor interest rate in effect two business days before the
first day of the month plus 2.50% or the Bank's prime interest rate minus 0.25%.
As of September 30, 2002, the interest rate was the one-month Libor rate of
1.82% plus 2.50% (4.32%). This revolving line of credit has a June 30, 2003
expiration date.

Under the line of credit, the Company is permitted to borrow up to 85% of
eligible accounts receivable and 50 percent of eligible inventories (up to a
maximum of $1.1 million and not to exceed 60 percent of the total outstanding).
The Company has granted the Bank a security interest in all of the Company's
assets as security for the repayment of the line of credit. The Bank agreement
contains various covenants which the Company is required to maintain, and as of
September 30, 2002, the Company was in compliance with these covenant
requirements.

NOTE 6. SIGNIFICANT CUSTOMERS

In the nine month period ended September 30, 2002, two customers accounted for
51% and 19%, respectively, of net sales. The Company does not have a written or
oral contract with these customers. All sales are made through purchase orders.
Accounts receivable from these customers at September 30, 2002, were $933,129
and $292,176, respectively.

F-6

NOTE 7. SIGNIFICANT SUPPLIERS

In the nine months ended September 30, 2002, the Company purchased 47% of its
raw materials, components and supplies from one supplier in connection with
sales to its largest customers. At September 30, 2002, the accounts payable to
this supplier was $1,585,258.

NOTE 8. FINANCIAL REPORTING FOR BUSINESS SEGMENTS:

The Company believes that its operations are in a single industry segment
involving the development and manufacture of products used in electronic
printing. All of the Company's assets are domestic. The sales to unaffiliated
customers by geographic region from continuing operations for the nine-month
periods ended September 30 are as follows:

2002 2001
----------- -----------
Sales to Unaffiliated Customers:
United States $13,294,061 $17,832,052
Europe 4,500,420 3,750,509
Asia 986,666 523,174
All Other 3,504,842 950,500
----------- -----------
Total $22,285,989 $23,056,235
=========== ===========

F-7

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF COLOR IMAGING, INC.
NORCROSS, GEORGIA

We have audited the accompanying consolidated balance sheets of Color Imaging,
Inc. (a Delaware corporation) and subsidiary as of December 31, 2001 and 2000
(as restated - see Note 3), and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Color Imaging, Inc.
and subsidiary as of December 31, 2001 and 2000 (as restated - see Note 3), and
the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the Unites States of
America.

LAZAR LEVINE & FELIX LLP

New York, New York
February 15, 2002,
except for the 3rd and 4th
paragraphs of Note 8(A)
the date of which is
March 20, 2002 and Note 16,
the date of which is
October 1, 2002

F-8

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000

2000
(AS RESTATED --
2001 SEE NOTE 3)
--------------- ---------------
- ASSETS -
CURRENT ASSETS:
Cash $ 393,981 $ 338,463
Accounts receivable -- net of allowance for doubtful accounts
of $100,000 for 2001 and 2000 2,894,003 3,443,901
Inventories 5,604,975 4,742,888
Deferred taxes 190,509 155,526
Related party portion of IDR bond -- current 79,596 76,032
Other current assets 335,621 400,725
Net assets of discontinued subsidiary 2,264,117 1,547,228
--------------- ---------------
TOTAL CURRENT ASSETS 11,762,802 10,704,763
--------------- ---------------

PROPERTY, PLANT AND EQUIPMENT -- NET 7,013,070 7,328,171
--------------- ---------------

OTHER ASSETS:
Deferred income tax - 155,984
Related party portion of IDR bond 818,500 898,096
Other assets 222,131 208,255
--------------- ---------------
1,040,631 1,262,335
--------------- ---------------
$ 19,816,503 $ 19,295,269
=============== ===============
- LIABILITIES & STOCKHOLDERS' EQUITY -

CURRENT LIABILITIES:
Revolving credit lines $ 1,462,416 $ 1,399,000
Accounts payable 4,841,414 6,465,686
Current portion of notes payable 340,232 299,123
Current portion of bonds payable 335,000 320,000
Other current liabilities 432,043 329,668
--------------- ---------------
TOTAL CURRENT LIABILITIES 7,411,105 8,813,477
--------------- ---------------

LONG TERM LIABILITIES:
Notes payable 1,352,893 1,665,792
Bonds payable 3,445,000 3,780,000
--------------- ---------------

LONG TERM LIABILITIES 4,797,893 5,445,792
--------------- ---------------

TOTAL LIABILITIES 12,208,998 14,259,269
--------------- ---------------

COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized 20,000,000 shares;
10,099,175 and 7,490,948 shares issued and outstanding on 100,992 74,909
December 31, 2001 and 2000, respectively
Additional paid-in capital 9,873,939 7,229,293
Stock subscription receivable (149,000) --
Accumulated deficit (2,218,426) (2,268,202)
--------------- ---------------
7,607,505 5,036,000
--------------- ---------------
$ 19,816,503 $ 19,295,269
=============== ===============

See notes to consolidated financial statements.

F-9

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

2000
(AS RESTATED -
2001 SEE NOTE 3)
-------------- ---------------

SALES $ 29,969,768 $ 11,385,069
COST OF SALES 25,598,095 9,882,089
-------------- ---------------
GROSS PROFIT 4,371,673 1,502,980
-------------- ---------------
OPERATING EXPENSES:
Administrative 1,464,683 773,744
Deferred charge write-off 215,371 --
Research and development 791,498 551,027
Sales and marketing 1,168,585 470,625
-------------- ---------------
3,640,137 1,795,396
-------------- ---------------
INCOME (LOSS) FROM OPERATIONS 731,536 (292,416)
-------------- ---------------
OTHER INCOME (EXPENSE):
Interest and other income (expense) 39,782 (126,457)
Interest and financing costs (395,598) (221,304)
-------------- ---------------
(355,816) (347,761)
-------------- ---------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 375,720 (640,177)
PROVISION (BENEFIT) FOR INCOME TAXES 121,790 (253,592)
-------------- ---------------
NET INCOME FROM CONTINUING OPERATIONS 253,930 (386,585)
DISCONTINUED OPERATIONS (NOTE 16)
(LOSS) FROM OPERATIONS OF SUBSIDIARY
DISPOSED OF - NET OF INCOME TAX (204,154) (271,799)
-------------- ---------------
$ 49,776 $ (658,384)
============== ===============

INCOME (LOSS) PER COMMON SHARE:
Basic:
Continuing operations $ .03 $ (.05)
Discontinued operations (.02) (.04)
-------------- ---------------
$ .01 $ (.09)
============== ===============
Diluted:
Continuing operations $ .03 $ (.05)
Discontinued operations (.02) (.04)
-------------- ---------------
$ .01 $ (.09)
============== ===============

WEIGHTED AVERAGE SHARES OUTSTANDING
OUTSTANDING-BASIC 7,985,071 7,055,763
-DILUTED 8,560,369 7,154,136
============== ===============

See notes to consolidated financial statements.

F-10

COLOR IMAGING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

ADDITIONAL STOCK TOTAL
COMMON PAID-IN SUBSCRIPTION ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL RECEIVABLE DEFICIT EQUITY
------------- ------------ ----------- ------------- ------------- -----------
Balance at December 31, 1999
(as restated - see Note 3) 3,999,987 $ 40,000 $3,058,241 -- $(1,609,818) $1,488,423

Acquisition of Color Image 3,000,000 30,000 3,194,039 -- -- 3,224,039

Exercise of stock warrants 46,211 462 91,960 -- -- 92,422

Common stock issued in
private placement 444,750 4,447 885,053 -- -- 889,500

Net loss for the year -- -- -- -- (658,384) (658,384)
------------- ------------ ----------- ------------- ------------- -----------

Balance at December 31, 2000
(as restated - see Note 3) 7,490,948 74,909 7,229,293 -- (2,268,202) 5,036,000

Exercise of stock warrants 55,452 555 110,349 -- -- 110,904

Exercise of stock, warrants,
cashless 1,104,815 11,048 (11,048) -- -- --

Common stock, issued for services 10,000 100 24,900 -- -- 25,000

Common stock, issued in private
placement 1,437,960 14,380 2,520,445 (149,000) -- 2,385,825

Net income for the year -- -- -- -- 49,776 49,776
------------- ------------ ----------- ------------- ------------- -----------

Balance at December 31, 2001 10,099,175 $ 100,992 $9,873,939 $ (149,000) $(2,218,426) $7,607,505
============= ============ =========== ============= ============= ===========

See notes to consolidated financial statements.

F-11

COLOR IMAGING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

2000
(AS RESTATED-
2001 SEE NOTE 3)
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 49,776 $ (658,384)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 603,100 379,117
Deferred income taxes 34,271 (154,294)
Compensatory shares 25,000 --
Decrease (increase) in:
Accounts and other receivables 718,471 207,672
Inventories (874,794) 683,183
Prepaid expenses and other assets (135,188) 296,054
Due from related party under IDR bond 76,032 81,706
Increase (decrease) in:
Accounts payable and accrued liabilities (1,630,229) 212,450
-------------- -------------
NET CASH (USED IN PROVIDED BY OPERATING ACTIVITIES (1,133,561) 1,047,504
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (785,496) (2,319,955)
Other assets 53,805 (53,805)
Patents and intellectual properties -- (5,000)
-------------- -------------
NET CASH (USED IN) INVESTING ACTIVITIES (731,691) (2,378,760)
-------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 63,416 (644,135)
Proceeds from long-term debt 27,865 500,000
Proceeds from sale of stock 2,496,729 981,922
Principal payments of long-term debt (667,240) (118,068)
-------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,920,770 719,719
-------------- -------------

NET INCREASE (DECREASE) IN CASH 55,518 (611,537)
Cash at beginning of year 338,463 950,000
-------------- -------------

CASH AT END OF YEAR $ 393,981 $ 338,463
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ -- $ --
-------------- -------------
Interest $ 417,107 $ 241,037
============== =============

See notes to consolidated financial statements.

F-12

COLOR IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000

NOTE 1. DESCRIPTION OF COMPANY:

On May 16, 2000, Color Imaging, Inc., formerly known as Advatex Associates, Inc.
(Advatex), Logical Acquisition Corp. (LAC), Color Acquisition Corp. (CAC),
Logical Imaging Solutions, Inc. (Logical) and Color Image, Inc. (Image) entered
into a Merger Agreement and Plan of Reorganization, as amended (Merger
Agreement), pursuant to which LAC merged with and into Logical and CAC merged
with and into Image (the Merger) and Logical and Image became wholly-owned
subsidiaries of Advatex. Pursuant to the Merger Agreement, stockholders of
Logical and Image exchanged their common stock for shares of common stock of
Advatex. A reverse stock split of one share of common stock for 6.0779 shares of
common stock was simultaneously approved for the then existing Advatex common
stock. Subsequently, the equity interests in Logical were converted by virtue of
the Logical Merger into approximately 3,000,000 newly issued shares of Advatex
common stock, on the basis of 1.84843 Advatex Common Shares for each one share
of common stock of Logical. The equity interests in Image were converted by
virtue of the Image Merger into approximately 3,000,000 newly issued shares of
the Advatex common stock on the basis of 15 Advatex common shares for each one
share of common stock of Image. The above transactions were consummated on June
28, 2000.

Prior to the completion of the above referenced transaction, Advatex was a
non-operating, fully reporting, public shell, and both Logical and Image were
privately owned operating enterprises. By the terms of the Merger Agreement and
Plan of Reorganization, the combination was contingent upon the agreement of all
of the enterprises, and it was, therefore considered a single business
combination.

Image and Logical each received the same number of shares and both the board of
directors and executive officers of the Company were equally divided between the
managements of Logical and Image. However, since the majority of the voting
stock was held by directors coming from Logical or including former Logical
directors, Logical was determined to be the accounting acquirer in the reverse
merger with Advatex, based upon guidance provided by Securities and Exchange
Commission (SEC) Staff Accounting Bulletin (SAB) Topic 2A and APB 16, regarding
Business Combinations.

The fair market value of the shares being issued in the reverse acquisition
transaction could not be determined and accordingly, the transaction was valued
at the fair market value of the issuer's net assets, which approximated their
carrying value. As a result, and consistent with treatment of a merger between a
non-operating public shell and privately held entity, no goodwill was
recognized.

Concurrently with the above transaction, Advatex, the legal acquirer, issued
3,000,000 shares of common stock (with a per share value of $1.00 as determined
in the aforementioned reverse acquisition by Logical of Advatex) in exchange for
the outstanding shares of Image. This transaction was accounted for under the
purchase method of accounting (see Note 3 - Restatement). The fair value of the
Image's assets was reviewed to determine the allocation of the cost of the
purchase to tangible and intangible assets, including goodwill. Management
determined that no adjustment to the financial statements of Image was
necessary, and that the fair value of the tangible and intangible assets of
Image was equivalent to their respective book values and no goodwill was
recognized in this transaction. The historical financial statements are those of
Logical, and the assets, liabilities and operating results of Image are only
included in the consolidated financial statements of the Company from the date
of acquisition, June 28, 2000.

The following unaudited pro forma results of operations were developed assuming
the acquisition had occurred at the beginning of the earliest period presented.

Year Ended December 31,2000
(Unaudited Proforma Data)
-----------------------------

Net sales $ 21,204,435
Net loss (517,934)
Loss per share $ (0.07)

See Note 16 regarding Subsequent Event - Disposition of Logical

F-13

NOTE 1. DESCRIPTION OF COMPANY (CONTINUED):

On July 7, 2000, by a vote of the majority of stockholders, Advatex Associates,
Inc. (Advatex), changed its name to Color Imaging, Inc. (the Company or Color)
and approved the reverse stock split. On December 31, 2000, Image merged into
Color with Color being the surviving entity. At December 31, 2001, there were
11,124,175 shares of the common stock of the Company issued and outstanding.
During March 2002 two transactions for the sale of 1,025,000 shares of the
Company's common stock were rescinded and retroactively reflected as of December
31, 2001.

Color develops, manufactures and markets products used in electronic printing
and photocopying. Color designs, manufactures and delivers black text toners,
specialty toners, including color and MICR (magnetic characters used on checks
and other financial documents). Color also supplies other consumable products
used in electronic printing and photocopying, including toner cartridges,
cartridge components, photoreceptors and imaging drums.

Logical's development efforts have focused on creating a digital variable
printing process that provides high-speed, color printing systems for commercial
applications. Logical designs, manufactures and delivers complete printing
systems, including software, control units and print engines to its customers.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Logical, Inc. All significant intercompany balances
and transactions have been eliminated in consolidation.

B. ESTIMATES AND ASSUMPTIONS:

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

C. FINANCIAL INSTRUMENTS:

The carrying amount of the Company's financial instruments, which include cash
equivalents, marketable securities, accounts receivable, accounts payable and
long-term debt, approximates their fair value at December 31, 2001 and 2000.

D. CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially subject the Company to concentrations of
credit risk are cash equivalents, marketable securities and accounts receivable.
The Company attempts to limit its credit risk associated with cash equivalents
and marketable securities and at December 31, 2001 its investments were in cash
held in highly rated financial institutions. With respect to accounts
receivable, the Company limits its credit risk by performing ongoing credit
evaluations and, when deemed necessary, requiring cash in advance, payment by
credit card, letters of credit or guarantees. The Company's customer base is
comprised principally of domestic distributors, remanufacturers of laser
printing consumable products and commercial printers. Management does not
believe significant risk exists in connection with the Company's concentrations
of credit at December 31, 2001.

E. CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

F. INVENTORIES:

Inventories are stated at the lower of cost or market with cost determined by
the first-in, first-out (FIFO) method for raw materials, work-in-process and
finished goods. Costs in inventory include materials, direct labor, and applied
manufacturing overhead.

F-14

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

G. PROPERTY, PLANT AND EQUIPMENT:

Property, plant, and equipment are recorded at cost. Replacements and major
improvements are capitalized; maintenance and repairs are expensed as incurred.
Gains or losses on asset dispositions are included in the determination of net
income.

Depreciation of the Company's property, plant, and equipment is computed using
the straight-line method. The average estimated useful lives are as follows:

Years
--------------
Leasehold improvements 10
Machinery and equipment 5 - 10
Furniture and fixtures 7 - 10

H. INTANGIBLE ASSETS:

Intangible assets are comprised of patents and intellectual property. All
intangible property is amortized by the straight-line method, over their
respective useful lives, commencing upon completion of commercialization.
Intangibles are periodically reviewed to assess recoverability from future
operations using undiscounted cash flows in accordance with SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of". To the extent carrying values exceed fair values, an impairment
loss is recognized in operating results.

I. STOCK-BASED COMPENSATION:

The Company grants stock options for a fixed number of shares of common stock to
employees with an exercise price equal to the fair value of the common stock at
the date of grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and
related Interpretations because the Company believes the alternative fair value
accounting provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation, (FAS 123) requires the use of option valuation models that were
not developed for use in valuing employee stock options. Under APB 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

J. INCOME TAXES:

The asset and liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for operating
loss and tax credit carry forwards and for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the results of operations in the period
that includes the enactment date. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets unless it is more likely than not
that such assets will be realized.

K. REVENUE RECOGNITION:

Color designs, manufactures and sells toner used in electronic printing. Revenue
from such product sales is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. At this time the earnings process is complete and
the risks and rewards of ownership have transferred to the customer, which is
generally when the goods are shipped and all significant obligations of the
Company have been satisfied. Both Logical and Color supply consumable products
used in electronic printing and revenue from the sale of such consumables is
also recognized when the goods are shipped. Sales of the printing systems
designed and manufactured by Logical have been negligible through December 31,
2001, and accordingly, the Company has not generated revenues from warranty
contracts and/or services provided for installation and maintenance.

F-15

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

K. REVENUE RECOGNITION (CONTINUED):

The Company recognizes revenues in accordance with Staff Accounting Bulletin
101, Revenue Recognition in Financial statements (SAB 101). As a result, the
publication of SAB 101 did not have an impact on the Company's financial
statements.

L. ADVERTISING COSTS:

In accordance with SOP No. 93-7, Reporting on Advertising Costs, the Company
expenses all advertising expenditures as incurred. The Company incurred $57,473
and $33,226 in advertising costs during 2001 and 2000, respectively.

M. RESEARCH AND DEVELOPMENT EXPENSES:

Research and development costs are charged to expense when incurred and
aggregated $791,498 and $551,027 for 2001 and 2000, respectively, from
continuing operations.

N. EARNINGS (LOSS) PER COMMON SHARE:

Earnings per common share are calculated under the provisions of SFAS No. 128,
Earnings per Share. SFAS No. 128 requires the Company to report both basic
earnings per share, which is based on the weighted-average number of common
shares outstanding, and diluted earnings per share, which is based on the
weighted-average number of common shares outstanding plus all potential dilutive
common shares outstanding. Since the Company reported a loss from operations in
2000, the exercise of stock options and warrants was not assumed since the
result would be antidilutive.

O. FOREIGN CURRENCY TRANSACTIONS:

During 2001, the Company began selling its products in certain overseas markets
where the prices were denominated in Euros. All balance sheet accounts resulting
from foreign transactions are translated into U.S. dollars at the rate of
exchange in effect at the balance sheet date and statements of operations items
are translated at the weighted average exchange rates for the year. The
resulting translation adjustments are made directly to a separate component of
stockholders' equity. Gains and losses from foreign currency transactions, such
as those resulting from the settlement of foreign receivables (or payables) are
included in the consolidated statements of operations. As of December 31, 2001,
there were no material balance sheet items resulting from foreign currency
transactions. Losses from the settlement of foreign receivables aggregated
$1,876 for the year ended December 31, 2001 and is included in other expense on
the statements of operations.

P. DEFERRED CHARGES:

The Company defers certain expenditures related to the activities associated
with the acquisition of business assets, which the Company has determined have a
future economic benefit. These expenditures are then capitalized into the cost
of the assets upon acquisition. Management reviews these assets whenever the
circumstances and situations change such that there is an indication that the
carrying amount is not recoverable. When management's best estimate of the
future economic benefit of these assets is less than the carrying amount, the
carrying amount is reduced to the fair value and a write-off is recognized.
Deferred charges written off are not restored.

At December 31, 2000, the Company had recorded deferred charges aggregating
$53,805 in connection with fees and costs related to the planned acquisition of
a manufacturing business, and, during 2001, incurred additional costs of
$161,566. The Company was not able to consummate this acquisition and, as of
December 31, 2001, wrote off such deferred costs.

Q. NEW ACCOUNTING STANDARDS:

In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44 (FIN 44), Accounting for Certain Transactions involving
Stock Compensation, an Interpretation of APB Opinion No. 25. FIN 44 clarifies
the application of APB No. 25 for certain issues, including the definition of an
employee, the treatment of the acceleration of stock options and the accounting
treatment for options assumed in business combinations. FIN 44 became effective
on July 1, 2000, but is applicable for certain transactions dating back to
December 1998. The adoption of FIN 44 did not have a material impact on the
Company's financial position or results of operations.

F-16

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Q. NEW ACCOUNTING STANDARDS (CONTINUED):

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
(SAB No. 101). SAB No. 101 expresses the views of the SEC staff in applying
generally accepted accounting principles to certain revenue recognition issues.
Subsequently, SAB Nos. 101A and 101B were issued delaying the implementation of
SAB No. 101 to the fourth quarter of 2000. The SAB requires companies to report
any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with Accounting

Principles Board (APB) Opinion 20, Accounting Changes. The adoption of SAB No.
101 did not have a material impact on the Company's financial position or
results of operations.

New accounting standards issued include SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes a comprehensive standard
for the recognition and measurement of derivatives and hedging activities. The
new standard requires that all derivatives be recognized as assets or
liabilities in the statement of financial position and measured at fair value.
Gains or losses resulting from changes in fair value are required to be
recognized in current earnings unless specific hedge criteria are met. SFAS No.
133 became effective for the Company beginning in the first quarter of fiscal
year 2001 but has had no impact on the Company's financial statements due to the
Company's limited use of derivatives.

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141")
and Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires all business combinations to
be accounted for using the purchase method of accounting and is effective for
all business combinations completed after June 30, 2001. SFAS 142 requires
goodwill to be tested for impairment under certain circumstances, and
written-off when impaired, rather than being amortized as previous standards
required. Furthermore, SFAS 142 requires purchased intangible assets to be
amortized over their estimated useful lives unless these lives are determined to
be indefinite. SFAS 142 is effective for fiscal years beginning after December
15, 2001. The Company is currently assessing the impact of SFAS 142 on its
operating results and financial condition but does not believe it will be
material.

On October 3, 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), that is applicable to financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new rules on asset impairment
supercede SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and portions of Accounting Principles
Board Opinion 30, "Reporting the Results of Operations". This Standard provides
a single accounting model for long-lived assets to be disposed of and
significantly changes the criteria that would have to be met to classify an
assets as held-for-sale.

F-17

NOTE 3. RESTATEMENT OF YEAR 2000 FINANCIAL STATEMENTS:

The financial statements for the year ended December 31, 2000, were restated to
reflect the business combination with Image (see Note 1) under the purchase
method of accounting as opposed to the pooling of interests method, as
previously reported. Accordingly, Image's financial statements are only
consolidated beginning with the date of acquisition, June 28, 2000. In addition,
the Company reclassified certain tangible assets that were erroneously
classified as Patent/Intellectual Property. The following tables present the
impact of the restatement, prior to Logical's operations being accounted for as
discontinued operations.

As Previously
Reported As Restated
-------- -----------
Year Ended December 31, 2000:
Balance Sheet:
Deferred taxes - current $159,426 $155,526
Related party portion - IDR bond, current 100,832 76,032
Property, plant and equipment, net 7,384,679 8,256,430
Patent/intellectual property 876,751 5,000
Deferred income tax, non-current 464,085 467,984
Related party portion - IDR bond, non-current 873,296 898,096
Accounts payable 6,640,402 6,665,322
Current portion of notes payable 351,150 343,408
Other current liabilities 400,276 370,765
Notes payable - non-current 1,685,725 1,698,058
Additional paid-in capital 6,986,003 7,229,293
Accumulated deficit (2,024,912) (2,268,202)

As Previously
Reported As Restated
-------- -----------
Year Ended December 31, 2000:
Statement of Operations:
Sales $21,204,435 $12,108,132
Cost of sales 17,946,605 10,329,418
Administrative expenses 1,966,929 1,145,954
Research and development 1,003,565 764,286
Sales and marketing 881,176 470,625
Interest and other income(expense) 351,062 (147,988)
Interest and financing costs (488,948) (241,037)
Benefit for income taxes (213,792) (332,792)
Net loss (517,934) (658,384)
Basic and diluted loss per share $(.07) $(.09)

SEE ALSO NOTE 1 -- UNAUDITED PROFORMA DATA AND NOTE 16 REGARDING SUBSEQUENT
EVENT - DISPOSITION OF LOGICAL

NOTE 4. INVENTORIES:

Inventories for continuing operations consisted of the following components as
of December 31, 2001 and 2000:

2001 2000
------------- -----------
Raw materials $723,480 $794,128
Work-in-process 967,982 1,275,545
Finished goods 3,987,343 2,705,546
Obsolescence allowance ( 73,830) ( 32,331)
------------- -----------
Total $5,604,975 $4,742,888

F-18

NOTE 5. PROPERTY AND EQUIPMENT:

Property and equipment of continuing operations consisted of the following as of
December 31, 2001 and 2000:

2001 2000
----------- -----------
Furniture and fixtures $ 86,586 $ 84,231
Test equipment 452,517 412,325
Manufacturing machinery and equipment 6,146,299 5,950,701
Leasehold improvements 1,268,506 1,252,021
----------- -----------
7,953,908 7,699,278
Less: accumulated depreciation and amortization ( 940,838) (371,107)
----------- -----------
$7,013,070 $7,328,171
=========== ===========

Depreciation and amortization expense amounted to $603,100 and $379,117 in 2001
and 2000, respectively.

NOTE 6. BORROWING ARRANGEMENTS:

As a condition of its Bank's consent to the business combination (see Note 1),
the Company, on August 30, 2000, entered into an amended and restated borrowing
arrangement, granting to the bank a security interest in all of the Company's
assets as security for the payment of the obligations owed the bank.

The Company has a $2.5 million revolving line of credit with an outstanding
balance as of December 31, 2001 of $1,462,416, which bears interest at the rate
of 4.75% (the one-month libor of 2.25% plus 2.5%) as of December 31, 2001. The
revolving line of credit has a June 30, 2002 expiration date. Under the line of
credit, the Company is permitted to borrow 85% of eligible accounts receivable
and 50% of eligible inventories (up to a maximum of $1.1 million).

The Bank agreement contains various covenants that the Company is required to
maintain; fixed charge and cash flow leverage ratios of not less than 1.20:1 and
not greater than 4.00:1, respectively. As of December 31, 2001, the Company was
not in compliance with these covenants and received a waiver from the bank as
regards these requirements for the period ending December 31, 2001. On February
7, 2002, the bank approved a modification to these covenants to a fixed charge
and cash flow coverage leverage ratios of not less than 1.05:1 and not greater
than 5.00:1, respectively. The Company is in compliance with these new
covenants.

Long-term debt was comprised of the following as of December 31:

2001 2000
---------- ---------
Term note payable to a financial institution due in monthly installments of
principal and interest of $848 through March 2003; bears interest at 8.0%,
collateralized by automobile with a net book value of $26,386 $12,021 $20,810

Term note payable to a financial institution due in monthly installments of
principal and interest of $10,676 through November 2005; bears interest at
10.215%; collateralized by inventory, accounts receivable and equipment 419,245 500,000

Term note payable to a financial institution in monthly installments of
principal and interest of $27,205 through June 2006 bears interest at
7.90%; collateralized by inventory, accounts receivable and equipment (see
Note 7) 1,234,755 1,444,105

Various equipment notes maturing in 2006 27,102 --
---------- ---------
1,693,123 1,964,915
Less current maturities 340,230 299,123
---------- ---------
$1,352,893 $1,665,792
========== ==========

F-19

NOTE 6. BORROWING ARRANGEMENTS (CONTINUED):

The aggregate scheduled maturities of long-term debt for each of the next five
years are as follows:

2002 $340,230
2003 360,316
2004 396,511
2005 428,542
2006 167,524
-----------
Total $1,693,123
===========

NOTE 7. INDUSTRIAL DEVELOPMENT REVENUE BOND:

On June 1, 1999, the Development Authority of Gwinnett County (the Authority),
issued $4,100,000 of industrial development revenue bonds on behalf of the
Company and a Related Party. The 3.5% revenue bonds are payable in varying
annual principal and monthly interest payments through July 2019. The bond is
secured by all the assets of the Company and by real property owned by the
Related Party. The bonds along with the line of credit and term loan (see Note
6) are held by two related financial institutions.

A loan agreement between the Authority and the Company and a Related Party
allows funds to effectively pass through the Authority to the Company. The
majority of the proceeds, $3,125,872, were used by the Company to purchase and
install certain manufacturing equipment, while $974,128 was used by the Related
Party to pay down the mortgage on the real property leased to the Company. The
Company and the Related Party are jointly obligated to repay any outstanding
debt. Under the Joint Debtor Agreement of June 28, 2000, between the Company and
the Related Party, each has agreed to be responsible to the other for their
share of the bond obligations and that any party causing an act of default shall
be responsible for 100% of the bond obligations. The amount for which the
Related Party is responsible to the Company is reflected in current and other
assets of the Company. The Related Party amounts owed to the Authority are
secured by a lien on the real property leased by the Company and by personal
guarantees executed by members of the Related Party. At this time, the Company
believes that the Related Party portion of the bond is fully collectible. As of
December 31, 2001, the bond principal outstanding was $3,780,000 and the portion
due from the Related Party was $898,096.

The aggregate maturities of bonds payable for each of the next five years are as
follows:

Company Related Party Total
---------- ------------- ------------
2002 $254,600 $80,400 $335,000
2003 266,000 84,000 350,000
2004 281,200 88,800 370,000
2005 296,400 93,600 390,000
2006 307,800 97,200 405,000
Thereafter 1,475,904 454,096 1,930,000
---------- ------------- ------------
Total $2,881,904 $898,096 $3,780,000
========== ============= ============

NOTE 8. STOCKHOLDERS EQUITY:

A. COMMON STOCK AND STOCK WARRANTS:

As discussed in Note 1, the Company issued an aggregate of 6,000,000 shares of
its common stock to the stockholders of Logical and Image in exchange for their
shares in Logical and Image in a merger transaction. Simultaneously, in 2000,
the Company effected a reverse stock split of one for 6.0779 shares of common
stock.

As part of the Merger, the Company granted warrants (the New Warrant) to
purchase up to 100,000 shares of the common stock of the Company to professional
advisors to the Merger. The New Warrant entitles the warrant holder to purchase,
at any time and for a five-year period, a share of common stock of the Company
for $2.00 per share. In addition, current stockholders at December 31, 2001, own
225,507 similar warrants (the Old Warrant). The Old Warrant entitles the warrant
holder to purchase, at any time until September 15, 2002, a share of common
stock of the Company for $2.70 per share. As of December 31, 2001 and 2000, the
Company had received $110,905 and $92,421, respectively, in proceeds from the
exercise of Old Warrants.

F-20

NOTE 8. STOCKHOLDERS' EQUITY (CONTINUED):

A. COMMON STOCK AND STOCK WARRANTS (CONTINUED):

The Company issued Units consisting of common stock and common stock underlying
warrants to investors in a private placement approved by the Board of Directors
on August 29, 2000. Each Unit in the private placement was priced at $2.00 and
consisted of one common share of the Company's common stock and one warrant to
purchase one share of common stock at an exercise price of $2.00. An additional
warrant to purchase common stock of the Company, for each Unit purchased in the
private placement, was issued to subscribers, at no additional cost, whose
investment(s) aggregated at least $300,000. The warrants expire November 30,
2003. During 2001, the Company issued and sold 1,437,960 Units for a total of
$2,925,920 in cash and notes receivable. The Company also issued, at no
additional cost, 1,312,960 additional warrants during this same period. In March
2002, subsequent to the balance sheet date, the Company rescinded one
transaction entered into during 2001 for the sale of 25,000 shares of common
stock and warrants to purchase 25,000 shares of the common stock of the Company.
This transaction has been retroactively reflected in the financial statements as
of December 31, 2001. The Company paid fees of $59,520 in connection with the
private placement. Additionally, the Company issued 129,837 warrants to finders
to purchase the Company's common stock at an exercise price of $2.00. During
2001, holders of the Company's warrants exercised 2,462,500 warrants on a
cashless basis and received 1,104,815 shares of the Company's common stock. No
underwriting discounts or commissions were paid to any person. As of March 12,
2002, all notes receivable have been fully paid by the investors.

On October 30, 2001, the Company issued and sold 1,000,000 shares of its common
stock to one accredited investor in exchange for $2 million. The purchase price
was $2.00 per share, of which $10,000 was payable in cash and $1,990,000 was
payable in the form of a recourse promissory note, payable at the earlier of (i)
six months after the registration statement covering the shares is declared
effective or (ii) twelve months from the date of the purchase agreement. The
Company also agreed to issue up to 500,000 warrants to purchase its common stock
to the investor in the event it resells the shares at a purchase price of at
least $2.00 per share. These warrants are exercisable for one year at an
exercise price of $2 per share. In March 2002, when the shares could not be
registered with the Securities and Exchange Commission while the promissory note
was unpaid, the Company and the investor mutually rescinded this transaction and
the Company has retroactively reflected this rescission as of December 31, 2001.

See also Note 16 regarding Subsequent Event

B. STOCK OPTIONS:

After the Merger, on June 28, 2000, the Company granted options to acquire
500,000 shares of the common stock of the Company to senior members of the
Company's management at an exercise price of $2.00 per share. The options vest
over a two to four year period and expire 5 years from their respective date of
vesting.

The Company granted options to acquire 710,000 shares of the common stock of the
Company to employees, officers and directors at an exercise price of $2.75 per
share during the year ended December 31, 2001. 535,000 options were granted to
officers and employees of which 25% vested immediately and the remainder vest
over 3 years. The officer and employee options expire 5 years from their
respective date of vesting. Each outside director of the Company was granted
options to acquire 25,000 shares of the common stock of the Company, for a total
of 175,000 options, effective upon his or her election or appointment to the
board of directors. The outside director options vest over 5 years, beginning
with the first anniversary date of his or her appointment to the board, and
expire 3 years from their respective date of vesting.

Pro forma information regarding net income and earnings per share is required by
Financial Accounting Standards Board Statement 123, and has been determined as
if the Company had accounted for its employee stock options under the fair value
method of that Statement.

The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 2001 and 2000, respectively, risk-free interest rate of 4.51%
and 6.02%, dividend yield of 0% and 0%, volatility factor of the expected market
price of the Company's common stock of .26 and .49, and a weighted-average
expected life of the option of 3 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management"s
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

F-21

NOTE 8. STOCKHOLDERS' EQUITY (CONTINUED):

B. STOCK OPTIONS (CONTINUED):

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:

2001 2000
------- -----------
Pro forma net income (loss) $3,021 $(840,587)
Pro forma loss per common share:
Basic .00 (.12)
Diluted .00 (.12)

A summary of the Company's stock option activity, and related information for
the year ended December 31 follows:

2001 2000
----------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------ --------- ---------- ----------
Outstanding, beginning of year 500,000 $ 2.00 -- $ --
Granted 710,000 2.75 500,000 2.00
Exercised -- -- -- --
------------ --------- ---------- ----------
Outstanding, end of year 1,210,000 2.44 500,000 2.00
Exercisable, end of year 503,750 2.21 250,000 2.00
Weighted average fair value of
options granted during the year $ 1.98 $ 1.85

The weighted-average remaining contractual life of these options is 4.8 years.

C. RETAINED EARNINGS:

The Company is limited in its ability to declare and pay dividends by the terms
of certain debt agreements.

NOTE 9. PENSION PLANS AND POSTRETIREMENT BENEFITS:

The Company has adopted the Color Image, Inc. Profit Sharing Retirement Plan.
Under this defined contribution plan, employees with one year or more of service
who have worked at least 1,000 hours and have reached age 21 are eligible for
participation. Participants may contribute between 1% and 15% of their
compensation as basic contributions. The Company will match 50% of the first 3%
deferred by any participant. Company contributions vest from 20% in the second
year of service to 100% in the sixth year. For the years ended December 31, 2001
and 2000, the Company incurred expenses of $24,355 and $9,940, respectively.

NOTE 10. RELATED-PARTY TRANSACTIONS:

A. LEASE

The Company leases certain facilities under a ten-year real property lease
agreement from Kings Brother LLC. (the Related Party -- see Note 7) which
expires on April 30, 2009. The rental payments for the periods ending December
31, 2001 and 2000 were $505,836 and $186,427, respectively. See also Note 12.

F-22

B. PURCHASES

The Company purchases copier and laser printer products from an entity in which
three directors have a beneficial ownership interest. Purchases for the 2001 and
2000 years aggregated approximately $4,005,500 and $435,500 respectively. See
also Note 14.

NOTE 11. INCOME TAXES:

The provision for income taxes is composed of the following

2001 2000
---------- -----------
Current:
Federal $130,470 $ (231,325)
State 73,380 (51,495)
Deferred:
Federal (87,500) 50,971
State 5,440 (21,743)
---------- ------------
$121,790 $ (253,592)
========== ============

The components of the net deferred income tax asset as of December 31, 2001 and
2000, are as follows:

2001 2000
---------- ----------
Deferred tax assets:
Inventory $ 165 $ 65,602
Accounts receivable 38,340 35,980
Accrued expenses 62,861 58,313
Federal tax credits 172,405 195,915
Net operating loss carryforward 92,344 225,600
---------- ----------
366,115 581,410
Valuation allowance for deferred tax assets (53,760) (90,000)
---------- ----------
312,355 491,410
Deferred tax liabilities:
Fixed assets (121,846) (179,900)
---------- ----------
Net deferred tax asset $ 190,509 $ 311,510
========== ==========

At December 31, 2001, the Company has recorded a net deferred tax asset of
$190,509 which is reflected in Current Assets and Other Assets in the
consolidated balance sheet. Realization of the asset is dependent on generating
sufficient taxable income in future periods. The Company had experienced
operating losses for 2000 and 1999 years. A significant portion of the loss
sustained in 2000 was a result of non-recurring moving expenses and management
does not foresee any like charges for the next few years. The Company has
taxable income for the 2001 and projects taxable income for 2002, as such, the
Company believes that it is more likely than not that a substantial portion of
the deferred tax asset will be realized, and consequently, has established a
valuation allowance of only $53,760 as of December 31, 2001.

At December 31, 2001, the Company had net operating loss carryforwards (NOLs) of
$491,074 for income tax purposes that expire in years beginning 2020.

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense attributable to income from continuing operations,
before cumulative effect of accounting changes is:

F-23

2001 2000
--------- ---------
Tax at U.S. statutory rates 34.00% (34.00)%
State income taxes net of federal tax benefit 6.16 (4.26)
Other-net (7.74) (1.35)
--------- ---------
32.42% (39.61)%
========= =========

NOTE 12. COMMITMENTS AND CONTINGENCIES:

A. LEASES:

The Company currently leases approximately 180,000 square feet in Norcross,
Georgia that serves as executive headquarters and houses manufacturing
facilities, research and development and sales and marketing under a lease that
expires April 2009. The lease includes three options to extend the term for five
years each, and contains provisions for annual rent increases through each term.
The Company also leases approximately 4,000 square feet in Santa Ana, California
under a month-to-month lease at the monthly rental rate of $3,072.

Minimum lease commitments are as follows:

2002 $ 518,481
2003 531,444
2004 544,730
2005 558,348
2006 572,307
Thereafter 1,958,285
-----------
Total minimum lease payments $ 4,683,595
===========

Rental expense aggregated $545,360 and $229,601 for 2001 and 2000, respectively.

B. EMPLOYMENT AGREEMENTS:

On June 28, 2000, the Company entered into employment agreements with its Chief
Executive Officer, Michael W. Brennan, President, Dr. Sueling Wang, Executive
Vice President and Chief Financial Officer, Morris E. Van Asperen, and Vice
President of Marketing and Sales Charles R. Allison. All four of the employment
agreements have a 5 year term. The Company is obligated to pay Mr. Brennan and
Dr. Wang annual salaries of $150,000 with a guaranteed increase of 5% per annum
over the term of the agreements. The Company is obligated to pay Mr. Van Asperen
an annual salary of $144,000 with a guaranteed increase of 5% over the term of
his agreement. In addition to commissions earned under the Company's sales
incentive program, the Company is obligated to pay Mr. Allison an annual salary
of $89,250 with a guaranteed increase of 5% per annum over the term of his
agreement. Each employee may terminate the agreement upon 6 months notice to the
Company. The Company may terminate each employee upon 6 months notice by the
Company; provided, however, that the Company is obligated to pay to the employee
his annual base salary, commissions or bonuses earned, and benefits for a period
of 12 months after the date of such notice.

The employment agreements with the above named officers also commits the Company
to purchasing for their benefit certain life insurance plans. For the year ended
December 31, 2001, the Company did not have in place for either Mr. Brennan or
Mr. Van Asperen such supplemental life insurance plans. The Company owns and is
the beneficiary of a life insurance policy on Mr. Allison and maintains it to
fund the deferred compensation agreement with Mr. Allison. Upon Mr. Allison's
retirement, he, or his beneficiaries, are to receive 120 monthly payments of
$2,000 per month or, as provided, the net present value of any unpaid amounts.
The life insurance premiums paid by the Company to fund Mr. Allison's deferred
compensation agreement in 2001 and 2000 were $21,977 and $11,238, respectively.
The Company pays the premiums and is the collateral assignee of four split
dollar life insurance policies owned by Dr. Wang. Pursuant to the policies the
Company will, upon his death or earlier liquidation of each such policy, be
entitled to the refund of all premium payments made by the Company on the
policies, and the balance of the proceeds will be paid to Mr. Wang's designated

F-24

beneficiaries. The split dollar life insurance premiums were $13,526 and $8,253
during 2001 and 2000, respectively. The monies due from Dr. Wang in connection
with these life insurance policies at the years ended December 31, 2001 and 2000
was $112,103 and $98,578, respectively.

See also Note 16 regarding Subsequent Event - Disposition of Logical

NOTE 13. SIGNIFICANT CUSTOMERS:

For the year ended December 31, 2001, three distributors/customers of imaging
supplies accounted for 42%, 16% and 12% of net sales from continuing operations.
For the year ended December 31, 2000, a reseller of imaging supplies accounted
for 64% of net sales from continuing operations. The Company does not have a
written or oral contract with any of these customers. All sales are made through
purchase orders.

NOTE 14. SIGNIFICANT SUPPLIERS:

For the years ended December 31, 2001 and 2000, the Company purchased 51% and
38%, respectively, of its raw materials, components and supplies from one
supplier in connection with the sale of both printer and copier products. See
also Note 10 B.

NOTE 15. FINANCIAL REPORTING FOR BUSINESS SEGMENTS:

2001 2000
------------ ------------
Continuing
U.S. $22,600,553 $10,164,567
Europe 5,255,415 743,749
Asia 647,146 375,020
Other 1,466,654 101,733
------------ ------------
Total $29,969,768 $11,385,069
============ ============

Discontinued
U.S. $ 429,930 $ 722,714
Europe 5,410 349
Asia -- --
Other 116,059 --
------------ ------------
Total $ 551,399 $ 723,063
============ ============

Combined
U.S. $23,030,483 $10,887,281
Europe 5,260,825 744,098
Asia 647,146 375,020
Other 1,582,713 101,733
------------ ------------
Total $30,521,167 $12,108,132
============ ============

NOTE 16. SUBSEQUENT EVENT - DISPOSITION OF LOGICAL:

F-25

NOTE 16. SUBSEQUENT EVENT - DISPOSITION OF LOGICAL (CONTINUED):

Following is summary financial information for the Company's discontinued
Logical Imaging Solutions, Inc. subsidiary:

Year Ended December 31,
2001 2000
------------ ------------

Net sales $ 551,400 $ 723,063
------------ ------------

Loss before taxes 289,328) (350,999)
Income tax benefit (85,174) (79,200)
------------ ------------
Net loss from discontinued
operations $ (204,154) $ (271,799)
============ ============

In addition, the amendment to the share exchange agreement also provides that
Mr. Brennan's employment agreement will be immediately terminated upon the
transaction's closing and severance of $6,058 per two-week period, plus
reimbursement of health and life insurance premium costs formerly payable
through June 10, 2003 will be terminated as of March 10, 2003.

The financial statements and related notes presented herein have been restated
to reflect discontinued operations accounting as a result of this transaction.

F-26

EXHIBIT A
SUBSCRIPTION AGREEMENT

COLOR IMAGING, INC.

COMMON STOCK

1. SUBSCRIPTION. Effective the ____ day of _______________, 2003, the
undersigned hereby applies to purchase:
----------------------------------------------------------- ( ) shares of the
common stock of Color Imaging, Inc. at a price of $1.35 per share, or a total
purchase price of ---------- ---------------------------------- Dollars ($
-------------);

such purchase being made in accordance with the terms and conditions of the
prospectus, dated January 23, 2003, according to which the shares have been
offered to the undersigned. The undersigned understands that the minimum
purchase is 100,000 shares. This subscription may be accepted or rejected in
whole or in part by Color Imaging, Inc. We have the right, exercisable in our
sole and absolute discretion, to accept subscriptions in any order we may
determine.

2. REPRESENTATIONS BY UNDERSIGNED. The undersigned represents and warrants
the following to be true and correct:

(a) the undersigned has received the prospectus dated January 23,
2003.

(b) the undersigned acknowledges and understands that no U.S. federal
or state agency, nor any governmental agency of any other jurisdiction, has made
any recommendation or endorsement of the shares;

(d) if an individual, the undersigned is 18 years of age or over and
is a bona fide resident of the state set forth in the residence address which
such individual has set forth below; and

(e) all of the representations of the undersigned herein are true and
accurate, and Color Imaging, Inc. will and may, without further investigation,
rely on such representations.

3. PAYMENT OF SUBSCRIPTION. The amount of the undersigned's subscription is
set forth below and the undersigned encloses payment of such amount herewith by
a check, cashier's check or wired funds transfer, payable to "Color Imaging,
Inc." The undersigned hereby authorizes and directs the officers and directors
of Color Imaging, Inc. to deliver this subscription agreement to Color Imaging,
Inc. and pay the funds delivered herewith to Color Imaging, Inc., to the extent
that the undersigned's subscription has been accepted.

The undersigned recognizes that if the subscription is rejected in whole,
the funds delivered herewith will be returned to the undersigned as soon as
practicable without interest or deduction, which investment is subject to the
discretion of the officers and directors of Color Imaging, Inc. If the
undersigned's subscription is rejected in part, the funds delivered herewith
will, to the extend the subscription is so rejected, be returned to the
undersigned promptly without interest or deduction.

4. CONTINUING ACCURACY OF REPRESENTATIONS. The undersigned agrees to notify
Color Imaging, Inc. immediately if any of the statements described above made
herein shall become untrue. Until such notification is given, Color Imaging,
Inc. and its officers and directors will be entitled to rely on the accuracy of
the information set forth herein.

5. OWNERSHIP. The undersigned's interest will be owned and should be shown
on Color Imaging, Inc.'s records as follows:

Name:
------------------------------------------------------------------

A-1

6. SUBSCRIPTION QUANTITY. The undersigned does hereby subscribe for
____________________ (_____) shares of Color Imaging, Inc.'s common stock at a
price of $1.35 per share, for a total subscription price of
$____________________, which amount is enclosed. [100,000 shares minimum
purchase]

IN WITNESS WHEREOF, the undersigned has executed this subscription
agreement.

--------------------------------------------- ---------------------------------------------
Name of Subscriber Social Security or Tax I.D. Number

--------------------------------------------- ---------------------------------------------
Name of Additional Social Security or Tax I.D.
Subscriber (if more than one) Number of Additional Subscriber

--------------------------------------------- ---------------------------------------------
Residence Address Mailing Address (if different from
Residence Address)

--------------------------------------------- ---------------------------------------------
City and State Zip Code City and State Zip Code

--------------------------------------------- ---------------------------------------------
Home Telephone Number & Area Code Business Telephone Number & Area Code

Form of Ownership (Circle One):

Individual JTROS Tenants Community Custodian Trustee
Ownership (all parties In Common Property
must sign) (both parties (one signature
must sign) required)

Authorized Signature of Subscriber Authorized Signature of Additional Subscriber

--------------------------------------------- ---------------------------------------------

A-2

No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by Color Imaging, Inc., a selling stockholder, or any underwriter. This
prospectus does not constitute an offer to sell, or a solicitation of any offer
to buy, common stock in any jurisdiction to any person to whom, it is unlawful
to make such an offer or solicitation in such jurisdiction. Neither the delivery
of this prospectus nor any sale made under this prospectus shall, under any
circumstances, create any implication that the information contained in this
prospectus is correct as of any time after the date of the prospectus or that
there has been no change in the affairs of Color Imaging, Inc. after the date of
this prospectus.

COLOR IMAGING, INC.

UP TO

7,000,000 SHARES

AND

3,959,487 SHARES OFFERED

SELLING STOCKHOLDERS

PROSPECTUS

JANUARY 23, 2003

1580815V2